The proportion of UK investors prioritising ESG issues has dropped over the last two years, with more than half now placing pure financial returns above sustainability, according to Charles Schwab.

The survey of 1,000 UK investors found 47% were making sustainability a priority over maximising returns, down from 55% in 2021.  

Meanwhile, the proportion taking ESG into account when making new investments fell from 44% in 2021 to 38% in 2023.

Richard Flynn, managing director of Charles Schwab UK, said: "With the need to maximise returns seemingly growing in importance amid the cost-of-living crisis, fewer investors seem to be factoring in ESG-related considerations into their investment decisions.” 

Higher fees often associated with sustainable investments were another factor. The proportion of investors willing to pay additional fees for sustainable investments decreased from 58% in 2021 to 50% in 2023. 

The report also found investors becoming less convinced that sustainability makes for superior investments. In 2021, 75% said companies with strong ESG credentials were attractive investment options; that figure had dropped to 68% in 2023. 

Only 65% of investors said that ESG funds yielded better returns, down from 71% in 2021. 

The appeal of sustainable investment varies across different generations. Gen Z investors remain the most likely to consider ESG factors in their investments (50%), closely followed by millennials (49%). 

Baby boomers and Gen X are the least likely to consider sustainable investments, with 23% and 32% taking ESG factors into consideration, respectively.

Flynn added: "It will be interesting to see how any economic rebound and reduction in inflation impacts this attitude in the coming years."

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