Investors now expect their fund managers to do much more than assessing risk and return, also looking for them to help navigate sustainability issues in much greater depth, reveals Triodos Bank UK.
New research, which polled UK investors, shows that 83% would expect or want to see their fund manager upskilling in sustainability and environmental issues, while 85% would like or expect their fund manager to help avoid “greenwashing” claims from financial providers. For new investors, this is even more important, rising to 91% of those that have begun investing in the past 12 months for both responses.
New investors are also demanding much more detailed analysis of the funds they invest in, with 90% wanting their fund manager to conduct in-depth research into each company in a fund to make sure every single investment aligns with their values and personal ESG criteria.
Investors expect fund managers to act on sustainability
As well as having greater expertise in ethical and sustainable investments, investors want to see their fund managers taking direct action in line with the values of their investors.
8 in 10 existing investors (81%) would expect or want to see their fund manager divest their investments from those that cause harm, which rises to 91% of new investors.
Meanwhile, 82% (rising to 92% of new investors) want their fund manager to engage with the companies they invest in directly on issues such as social impact and sustainability.
Bevis Watts, CEO of Triodos Bank UK, commented:“Our research demonstrates that the majority of investors are looking for active stewardship from their investment managers, with the peace of mind and expertise that passive funds just can’t provide.
“A generational shift in expectations is clearly happening, which has the potential to disrupt the investment management industry.”
New investors prioritise impact over returns
In the past year, a new generation of purpose-led investors have come to financial providers with a greater expectation of sustainable and impact investing. Almost half (48%) of these new investors are under 35 years of age, and three-quarters (75%) are under 45, indicating that positive social and environmental impact is a much greater priority for younger consumers starting their investment journey.
In fact, 60% of those that began investing in the last 12 months think that financial providers should only offer investment ISAs that are sustainable, while 78% believe that financial providers need to do more to help to combat the climate crisis.
As testament to their passion for investing with positive impact, 6 in 10 new investors (63%) would be happy to settle for lower returns to invest in industries they believe in.
World events and ongoing coverage of the climate crisis is likely leading many new investors to consider their impact, as 56% reported that COP26 made them give greater thought to how their investments impact the planet.
Michael Kind, senior campaigns manager at ShareAction, said: “ShareAction is not surprised to see increasing numbers of retail investors understand the impact of their money on the world, and to recognise that impact on people and planet is just as important as returns. In our view, a responsible approach to investment should be the main consideration for the global money managers who invest money on behalf of retail investors. A true responsible investor sees negative impacts as just as important as financial return, and takes steps to mitigate or avoid these impacts.”
Sustainability concerns driving choice of provider and management
Across the board, sustainability concerns are shaping how investors are considering how, and with who, they choose to invest their money. A quarter (25%) of investors with actively managed funds chose this specifically to ensure that their investments are continually checked to avoid practices that are not aligned to their values. One in five (19%), meanwhile, chose active management to have a fund manager help sift through “greenwashing” claims to choose investments that are truly sustainable.
Looking ahead at future investments, a fifth (21%) of investors say they would choose a future financial provider based on how much they trust it to invest in line with their values, rising from 14% already having chosen their provider based on this – showing that this is an issue that is of increasing interest and importance to investors. Active management will also be a greater focus for many, with a quarter (26%) of investors planning to take out or increase actively managed funds.
Hadewych Kuiper, managing director of Triodos Investment Management, said: “A new generation of investors are demanding more from fund managers and financial providers in terms of sustainability – and rightly so. With an increasingly complex sustainable investment landscape, fund managers can play a vital role in helping to separate dubious greenwashing claims from those that truly benefit the planet.
“To meet this consumer demand for impact and transparency, investment managers need to ensure they are staying up to date with the latest products, research and policy developments in sustainability. Only then will investors be able to trust that their money is really being invested in line with their values.”