Investors failing to ‘walk the talk’ on ESG products

Usage of environmental, social and governance (ESG) products remains low at just 10% of retail investors but 65% say they have interest in doing so in the future.

In a survey by the CFA Institute, only 10% of retail investors were invested in ESG products and 19% of institutional investors.

However, the number of investors who were interested in these types of strategies was far higher at 76% of institutions and 65% of retail ones.

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The number of CFA Institute members who said they took ESG into account had risen from 73% in 2017 to 85% and 90% of respondents said they expected their firms’ commitment to ESG research would increase, up from 72% two years ago.

The study, which questioned 7,000 people, found people considered ESG for reasons including client demand, potential for improved financial returns and the need to manage investment risks.

Over three-quarters of respondents said there was a need for improved standards around ESG in order to mitigate greenwashing and boost transparency.

“Incorporating sustainability in investment management has become part of our industry’s mission to serve society by improving long-term outcomes,” said Margaret Franklin, president and chief executive of CFA Institute.

“This moment represents a valuable opportunity for organisations to address this challenge and help shape a future worth investing in. As the focus on sustainability in investing gathers momentum, it will eventually dictate the sustainability of investing itself.”

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There's also the confusion of third-party assessors - which ESG products to trust? which ESG assessor to trust?

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