Responsible investors driven by convenience and pragmatism
In late 2021, close to the peak of one of the biggest rallies in the history of Australian equities, the majority of Australians (56 per cent) were either doubtful or sceptical about responsible investing, according to Netwealth research.
The ASX-listed platform provider surveyed investors again in late 2022, a very different year for equities compared to 2021. Whether or not performance impacted the ethical, social and governance (ESG) priorities of Australian investors is difficult to say. But one thing is for sure — the numbers don’t lie.
Netwealth’s 2022 Advisable Australian research figures, shared exclusively with Money Management found that more Australians were more optimistic about returns from responsible investing: 27 per cent thought returns were better than traditional investments, up from 21 per cent in 2021.
Younger Australians were far more likely to invest responsibly than older generations, with the data revealing Gen Y as the largest cohort (38 per cent, up from 28 per cent), followed by Gen Z (37 per cent, up from 29 per cent) and Gen X (28 per cent, up from 20 per cent).
Men also increased their responsible investments more than women (38 per cent, up from 25 per cent). Only a quarter (24 per cent) of women invested responsibly in 2022, up from 19 per cent in 2021.
ESG sceptics harden their stance
Although responsible investing had increased across the board, those that were on the fence tended to harden their stance towards ESG.
The overall figure of those who would never consider investing in socially responsible investments increased to 34 per cent from 26 per cent.
The results of that survey divided respondents into four responsible investing segments: believers, pragmatists, doubters, and sceptics.
The largest cohort (28 per cent, down from 36 per cent) were doubters. These individuals did not typically invest in responsible investments. They were not against it as such, but neither were they strongly for it. They were in the middle and usually either doubted or lacked a strong opinion about it either way.
The second largest cohort (27 per cent, unchanged since 2021) were believers. These were people who believed in socially responsible investing and supported ESG principles. They wanted their investments to make a difference.
Almost a quarter (23 per cent, up from 20 per cent) were sceptics. These were people who do not really understand responsible investing, nor do they wish to. Sceptics would not invest responsibly, even if it were financially beneficial, and are highly unlikely to be convinced otherwise, no matter the strategy or approach adopted by the adviser.
The group that grew the most over the year were the pragmatists (23 per cent, up from 17 per cent).
These people were most likely already invested in socially responsible assets, but did so out of pragmatism, as a way to diversify or as an opportunity for smart investments that could produce high returns.
Their attitudes towards the environment or responsible investing were somewhere in the middle, yet they invested and typically had a high understanding of this type of investing.
It is worth noting that the 2022 data found convenience to be an increasingly large consideration. A significant proportion of Australians (39 per cent) would only invest in socially responsible investments if it was convenient (up from 28 per cent).
This shift is increasingly pronounced among Gen Z (48 per cent, up from 35 per cent).
AUTHOR
James Mitchell
Recommended for you
Amid a growing appetite for alternatives, investment executives have shared questions advisers should consider when selecting a private markets product compared to their listed counterparts.
Chief executive Maria Lykouras is set to exit JBWere as the bank confirms it is “evolving” its operations for high-net-worth clients.
Bennelong Funds Management chief executive John Burke has told Money Management that the firm is seeking to invest in boutiques in two specific asset classes as it identifies gaps in its product range.
Responsible investment performance concerns have lessened as the market hits $1.6 trillion in AUM, according to RIAA’s annual report, but greenwashing fears among asset managers are on the rise.
