Confusion continues to plague ESG investment: CFS

responsible investment ESG CFS stewardship RIAA

14 November 2023
| By Jasmine Siljic |
image
image
expand image

New research has highlighted Australian consumers’ ongoing confusion around ESG and sustainable investing, with less than 10 per cent fully understanding these terms. 

A survey of 1,496 Australians commissioned by Colonial First State (CFS) found that just 6 per cent are certain they understand ESG or sustainable investing. 

Only 29 per cent are aware of these terms, while nearly half of respondents (48 per cent) said sustainability investment claims are confusing.

The research also discovered that Australian consumers struggle to differentiate between different ESG investment options. 

Just 9 per cent of those surveyed expressed confidence in their ability to identify differences between a “sustainable fund” and an “impact fund”. Meanwhile, 58 per cent don’t know how to compare ESG funds.

Nearly half of respondents lack knowledge when it comes to common industry terms such as “net zero” (50 per cent) and “carbon offset” (43 per cent). 

“At the heart of the issue is the lack of agreed definitions across the industry and the broader economy, the subjectivity of the underlying ESG considerations and the inherent trade-offs between them,” CFS said. 

Earlier this month, it was announced that the CFA Institute, the Global Sustainable Investment Alliance (GSIA), and Principles for Responsible Investment (PRI) collaborated to harmonise definitions for five terms, namely:

  • Screening
  • ESG integration
  • Thematic investing
  • Stewardship
  • Impact investing

Intended for investors, regulators, policymakers and other market participants, the development of the resource is a response to noteworthy shifts in the responsible investment landscape. 

In light of the research findings, CFS urged the Australian government and regulators to work alongside each other to develop more consistent consumer labelling standards. 

The investment manager also expressed support for the government’s open consultation on Australia’s sustainable finance strategy.

The consultation paper noted the country’s transition to net zero will require a significant amount of private and public investment, and it’s crucial that financial markets are well-placed to finance this transition and therefore support the government’s emissions reduction target.

“The strategy will help mobilise the private investment needed in coming decades, enable Australian firms to access the capital needed to finance their own transitions and take advantage of new opportunities that arise, and ensure that the financial opportunities and risks presented by climate change are identified and well-managed,” the paper stated.

CFS said it will engage during the consultation to support objectives of the strategy. 

Read more about:

AUTHOR

Add new comment

The content of this field is kept private and will not be shown publicly.
 

Recommended for you

 

MARKET INSIGHTS

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

Chris Cornish

By having trustees supervise client directed payments from their pension funds, Stephen Jones and the federal Labor gove...

2 days 23 hours ago
Chris Cornish

Now we now the size of Stephen Jones' CSOLR tax, I doubt anyone will be employer any new financial adviser from this poi...

2 days 23 hours ago
JOHN GILLIES

Amazing ! Between the beginning of licencing Feb 2002 and 2008 this was a very good stable industry.Then the do-gooders...

3 days 18 hours ago

AustralianSuper and Australian Retirement Trust have posted the financial results for the 2022–23 financial year for their combined 5.3 million members....

10 months 2 weeks ago

A $34 billion fund has come out on top with a 13.3 per cent return in the last 12 months, beating out mega funds like Australian Retirement Trust and Aware Super. ...

10 months ago

The verdict in the class action case against AMP Financial Planning has been delivered in the Federal Court by Justice Moshinsky....

10 months 2 weeks ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND