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ESG: How much return is required to offset guilt?

MillennialMillennial investors who would abandon their ideals surrounding sustainable investing would want a return of 21% to “offset any guilt”.

Schroders found a quarter of millennial investors surveyed would invest against their personal beliefs if the returns were high enough. Three-quarters would not compromise on beliefs.

Schroders' research covered 23,000 people of various ages globally and it is millennials who are more likely to compromise on their personal beliefs in order to benefit from potentially higher returns.

The older people get, the less likely they are to compromise their beliefs for the sake of higher returns. Some 16% of those aged 71 or over would swap ideals for returns, for example. The figures are 20% for baby-boomers and 24% of those classed as Generation X. 

Geographically, people in China, Italy and Portugal are the most likely to stay true to their views, with the least probable being those based in the US, Singapore and Thailand.

Overall, 42% of investors globally did state that investing sustainably was likely to lead to higher returns. Some 47% said they were attracted to investing sustainably due to its wider environmental impact.

Carolina Minio-Paluello, Schroders’ global head of product, solutions and quant, said: “It is exceptionally positive to see that many investors today believe that investing sustainably does not have to come at the expense of performance. People want their values reflected in the way they invest.

“It is our experience that investment performance and returns should not be mutually exclusive. The evidence is increasingly clear that investing sustainably can lead to better long-term outcomes.”

A surprisingly finding was that “just 44%” of European respondents said they invest in sustainable investment funds, as opposed to funds that don’t consider sustainability factors. This lags investors in the Americas (52%) and Asia (49%) and comes, said Schroders, despite the common consensus being that European investors are generally more likely to embrace sustainable investing.

Opinion was split among investors in terms of how asset managers should address challenges that arise from the fossil fuel industry. Just over a third (36%) said managers should withdraw investment from companies in these industries to limit their ability to grow. However, over a quarter (27%) said managers should remain invested to drive change.

Furthermore, investors said that the top three ‘behaviours’ companies should be most focused on were their social responsibility, attention to environmental issues and the treatment of their staff.

The findings are published in Schroders Global Investor Study 2020.

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