UK ISA holders are calling for increased transparency in how their money is invested, amid a rise in interest in ethical and sustainable investments spurred on by the pandemic and a new generation of investors.
New research from Triodos Bank UK can reveal that seven in 10 UK consumers (71%) think that banks and financial providers need to be more transparent about how they invest their customers’ money, while two thirds (64%) say the Government needs to do more to make banks be transparent.
Meanwhile, half of UK adults (50%) think that banks and financial providers purposefully hide the sectors they invest in from their customers.
Consumers are also calling for increased transparency when it comes to avoiding greenwashing, with 64% saying there needs to be industry-wide standardisation in the definition of ‘sustainable’ or ‘ethical’ funds.
Yet despite this strong call for transparency, the majority of ISA holders (61%) admit that they have never taken steps to ensure their money is being invested in line with their values.
Young consumers look to invest pandemic savings
2021 could be the year that sustainable investing sees a boost in the UK, with a new generation of younger investors looking to use their money in a way that creates positive social and environmental change, as well as providing long-term financial security.
While many younger people have faced unemployment, reduced working hours or a difficult financial situation over the past year, two fifths (42%) have found themselves with more money to spare from not spending as much during the pandemic.
For young people on both sides of this coin, investments are becoming increasingly attractive. Four in ten 18-34 year olds (40%) say that their interest in ISAs and investing has increased during last 12 months, with the most common reason for this being that the pandemic has made them more aware of the need to have a secure long-term financial future.
One in five 18-34 year olds (18%) – equating to over 2,600,000 people* – are looking to open a new or additional ISA this year, while an additional one in 10 (9%) will move more money into an existing ISA. These new investments are most commonly going into investment, rather than cash ISAs – with 51% planning to open a Stocks and Shares ISA, and 25% considering an Innovative Finance ISA that offers crowdfunded investments.
Younger investors are much more likely to choose investments and providers that align with their values, with 94% of ISA holders age 18-34 saying they already have, or would consider switching their money to an ethical provider – compared to 71% of over 35s. This indicates that as the next generation of investors comes to choose their ISA products, there could be a significant boost in ethical and sustainable investments.
Increase in values-based investing
Across all ages, interest in ethical investments are on the rise. Investors are looking to use their investing power to support healthcare and a greener future, with two thirds (62%) claiming the industry needs to do more to help people invest their money in a way that supports positive social and environmental change.
When it comes to avoiding industries with negative connotations, there is a clear opportunity to offer investors the chance to align their money with how they choose to act on their personal values in other ways. Over a third of people who wouldn’t want their investments to support fossil fuels (37%), fracking (36%) or gambling (33%) say they would not work in these industries. Likewise, a third of those that wouldn’t want to invest in fossil fuels (37%), fracking (34%) or fast fashion (32%) say they would not vote for a politician that had links to these sectors.
Gareth Griffiths, head of retail banking at Triodos Bank UK, said: “When such a large proportion of young people are interested in an impact investment ISA that matches their values, it suggests that there has been a real step change in awareness of the links between personal finances and the wider world. We want to encourage people to think about what their ISA pot is doing, just as they would consider the ethics of what company to work for or what politician to vote for.
“As a new generation looks to ISAs for post-pandemic financial security, demand for funds to be transparent in their investments will only increase. For too long, the financial industry has hindered consumers from being able to make informed choices about where their money goes. We need to give consumers clear options to use their investments in line with their values – whether that’s investing in new technology, sustainable energy or healthcare systems.”
Kia Commodore, personal finance expert and founder of financial literacy platform Pennies to Pounds, said:“Young people are sparking a movement towards sustainable investments that will make ripples throughout the investment industry. We are seeing the rise of empowered investors, who want to know much more about where their money is going and what it is funding. They are taking control and making decisions to invest in companies that best align with their personal values. Investment providers who fail to join this movement may lose the backing of this new generation of investors in the long term.”
Triodos Bank offers award-winning Impact Investment funds available through a Stocks & Shares ISA in the UK – the Triodos Pioneer Impact Fund, the Triodos Global Equities Impact Fund and the Triodos Sterling Bond Impact Fund. Long term performance of the funds shows a five-year average return of 10.75% for the Triodos Global Equities Impact Fund and 13.34% return with the Triodos Pioneer Impact Fund**. Note that past performance is not a guide to future returns.
Triodos Bank also offers an Innovative Finance ISA (IFISA) through its crowdfunding platform, which offers direct investments in bonds with organisations delivering positive change.
Capital in any investment product is at risk. The value of an investment may go down as well as up and investors could lose some or all of their money. Currency fluctuations may also affect the value of a Triodos Stocks & Shares ISA. For the Triodos Innovative Finance ISA, investors may not be able to access their capital during the life of their investment. As with all ISAs, the tax benefits depend on individual circumstances, and tax rules may change. The total annual ISA allowance is £20,000, which can be split across different types of ISAs.