James Alexander
CEO, UKSIF (UK Sustainable Investment and Finance Association)
Consumers increasingly wish to see their values meaningfully reflected in their pensions and investments and are aware of the powerful potential this can have in driving progress towards a greener future.
How has the way we view our investments changed in recent years?
The conviction among consumers is reflected in UKSIF, by a poll carried out annually to mark our ‘Good Money Week’ campaign. This raises awareness of how we tackle the barriers between public engagement and sustainable investments. A clear trend has emerged: savers ‘only or mostly’ interested in whether their investments are making financial returns has steadily declined.
Challenges in comparing funds
This trend has encouraged momentum among investors to more comprehensively consider environmental, social and governance (ESG) factors. However, a lack of common criteria defining what constitutes a sustainable investment has been a challenge, making it extremely hard for savers to compare different funds in the market and assess how these might align with their values.
The rising interest on ESG investing has placed an enormous responsibility on financial services.
The Financial Conduct Authority’s recent work on an investment labels system aims to help consumers navigate the diverse range of sustainable investments. It will ensure firms are held to account for their sustainability claims and hopefully combat ‘greenwashing.’ There are a number of actions our sector can take while this work progresses and by which consumers should question their financial providers.
Communication with consumers
Firms should seek ways to communicate more innovatively with consumers, making greater use of digital solutions and recognising a key barrier to sustainable investing can often be the language they use.
Public education needs to be a priority – including tackling the misconception that savers need to accept lower returns when making investments that align with their environmental principles.
Carefully explaining to consumers the multi-faceted nature of sustainability is vital, for example a sustainable fund may not necessarily focus on the climate crisis alone, but may also consider other environmental issues such as biodiversity.
All generations care about sustainability
We should not assume all groups have limited understanding of sustainability issues or do not wish to make a positive impact with their investments. There has been a prevailing view that the younger generation cares the most about sustainability, but research published during UKSIF’s ‘Good Money Week’ last year showed this desire is not confined to a particular generation, with the 60+ demographic caring the most about sustainable finance options.
The rising interest on ESG investing has placed an enormous responsibility on financial services. We are hopeful the sector can rise to the challenge and facilitate more sustainable investing in the coming years.