Half of retail investors to shift investments into ESG

Wealth advisers risk losing clients if they don’t focus on ESG investing, according to new research.

The research by behavioural finance experts Oxford Risk found that 50% retail investors are intending to shift some of their investments, including pensions, into environmental, social and governance (ESG) investments this year.

Of those 50%, one in seven investors (14%) plan to move 60% or more of their investments to ESG in 2022, as the spotlight on ethical and sustainable investing intensifies.

Oxford Risk’s study found that 41% of investors believe the ESG credentials of advisers and wealth managers are important when it comes to the investment advice they offer. That said, one-quarter (24%) say ESG credentials are unimportant.

Those figures are likely to change over the next few years, say Oxford Risk, as 42% of investors say ESG is likely to become more important in helping wealth managers to win business.

“ESG investing is building momentum, with half of retail investors planning to move at least some money into ESG funds over this year,” says Greg Davies, head of behavioural finance at Oxford Risk.

“It is clearly good news that retail investors are engaging with their investments and making positive decisions and advisers need to engage as well by focusing on delivering the best possible service for investors.”

Advisers risk losing clients if they ignore ESG

Advisers who are unable to demonstrate a commitment to and focus on ESG investing could start losing clients, says Davies, adding that “investors are ready to move money to new advisers if they are unhappy”, and in particular, will deploy cash into new investments that greatly favour strong ESG propositions.

Research found that 63% of retail investors surveyed said they have or would consider moving investments to new advisers due to the fact they are unhappy with the ESG focus from their wealth managers. While 20% admitted to having already moved investments, or that they intended to do so, a further 43% said they would move if they were unhappy about the ESG commitment.

The UK-based researcher further flagged technology as playing a crucial role for investment providers and advisers in order to meet the responsibilities of matching socially minded investors to suitable ESG investments.