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The Actuary The magazine of the Institute & Faculty of Actuaries

Pension industry told to grasp responsible investment opportunity

The majority of private investors are now interested in environmental, social and governance (ESG) factors, and many think these are more important than returns.

Rising interest in responsible investment ©iStock

That is according to a study by Research in Finance, which said there is an untapped opportunity for asset managers to “take responsible investing mainstream”.

It found that three in five private investors in the UK think they already invest responsibility or are interested in doing so, with this particularly true among women under the age of 55.

And although 43% of investors are unwilling to sacrifice performance to invest responsibly, 24% said they would be “relatively willing” to do so, and a third are somewhere in between. 

“Investors have realised the ethical impact that fund managers can have in respect of the companies they buy into and engage with,” Research in Finance director, Toby Finden said.

“There is a clear message, certainly in respect of the wealth generators under 55, that to fail to offer clients a credible responsible investing service is to consign a business to decline.”

The research involved a survey of 1,001 private investors, and found that many are receptive to a range of responsible investment approaches, from ESG integration to thematic investing.

Personal values are the main motivators, cited by 50% of those interested in responsible investment, followed by a desire to avoid harmful companies and industries, mentioned by 46%.

Wanting to have a positive impact and recent developments around climate change were also cited as important reasons to investors.

And Research in Finance said responsible investment could grow even further if more investors were aware of the positive link between ESG considerations and performance.

“Lack of awareness and knowledge is one of the biggest barriers,” said head of insight, Annalise Toberman. “Investors understand the ethical, but not necessarily the financial case.

“The problem is compounded by the fact that most wealth managers and financial advisers don’t proactively discuss ethical preferences with their clients. 

“There is huge scope for asset managers to help fill the knowledge gaps for private investors.” 

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