Over the past couple of years, the UK has faced unprecedented challenges, especially in terms of the economy and our wealth. Whilst we have adapted to a post-pandemic world, our spending habits have certainly changed.
But what are the views of high-net-worth individuals (HNWIs) in light of these changes? And how do they expect this to affect their own finances and personal lives?
In response to this question, Saltus, a financial planning and investment management firm, has surveyed over 1,000 HNWIs, with investable assets of over £250,000 and a median net worth of £1,500,000.
The survey took place in August 2021, and the results were published in the inaugural Saltus Wealth Index in October 2021.
One of the areas highlighted as a significant concern was climate change, and in turn, Environmental, Social, and Governance (ESG) investing.
In this article, we’ll explore further HNWIs’ attitudes to ESG investing and their personal finances.
What is ESG investing?
As mentioned above, ESG stands for Environmental, Social, and Governance. Sometimes known as responsible investing, it involves the integration of ESG factors when constructing an investment portfolio.
Before making any investment decisions, ESG issues would be considered, as well as managing a portfolio which contributes to sustainable benefits for the economy, the environment and society.
Are HNWIs becoming greener?
According to the Saltus Wealth Index, two thirds (64%) of individuals with assets of £250,000 and over, are actively investing in ESG.
However, the choice to make greener investments is more apparent amongst the younger generation. Of those surveyed, a staggering 80% of respondents aged 18 to 24 revealed that they are investing in green stocks.
This number falls when surveying the older generation, and in particular, those aged over 65 – just 24% are investing in this sector. Furthermore, 38% of those surveyed believed their children care more about ESG issues than they do themselves.
The survey also discovered variations in attitudes between gender. As such, men are more likely to invest in impact or green stocks (66%) compared to women (59%). There were also disparities in terms of location — investors living in London are more likely to invest in ESG, compared to others across the UK.
Three quarters (75%) of those surveyed, and whom are living in the capital, are also currently investing in green stocks. Whilst only half (50%) of respondents in Scotland, and less than half in the Midlands, South West and Wales, answered in the same way.
Scepticism of ESG investing
Despite the fact that two thirds of HNWIs are investing in ESG, many remain sceptical. Amongst the reasons given for not yet investing in impact or green stocks, respondents were concerned about returns. 31% believe that ESG investments do not generate sufficient returns.
There were also concerns surrounding the actual impact of this type of investing. 27% of those surveyed believed responsible investments do not make a difference, whilst 26% think that sustainable investing is just hype.
As part of the Saltus Wealth Index, one respondent made the following statement:
“There aren’t enough funds — and right now the funds there are, are over-bought.”
These thoughts were not uncommon, as one in four (24%) of HNWIs mistrust aspects of ESG investing, believing the reporting and analysis of ethical investments is not robust enough. Furthermore, one in five (22%) of respondents stated they do not think green funds are truly environmentally friendly.
It can be concluded, therefore, that there’s a mixed picture surrounding ESG investing and the personal finances of HNWIs.
If you’re interested in ESG, then it’s worth consulting with an investment management firm who believe in responsible investing, and can help construct your portfolio accordingly.