Investors expect fund managers to upskill on sustainability

Some 60% of those new to investing say banks should only offer sustainable investment Isas, indicating further generational shifts

Some 83% of UK investors have said they expect fund managers to increase their knowledge on sustainability issues, or “upskill”, in order to weed out the greenwashing companies from portfolios, research has found.  

A survey carried out by Triodos Bank UK, which polled 1,004 UK investors between 23 February and 2 March 2022, found eight of out 10 would like to see fund managers have greater expertise in sustainable investments – for newer investors, those that have begun investing in the past 12 months, this rises to 91%.

Furthermore, 90% of new investors want to see evidence of in-depth ESG research into each fund holding to ensure it aligns with their values and personal ESG criteria. A quarter of actively managed fund holders also said they want to see their funds continually checked to avoid practices that are not aligned to their values, and 19% said they would favour active management for sustainable investing where a fund manager is sifting through greenwashing claims to choose investments that are truly sustainable.

This comes as 60% of new investors also said that financial providers should only offer investment Isas that are sustainable.

Bevis Watts, CEO of Triodos Bank UK, commented: “A generational shift in expectations is clearly happening, which has the potential to disrupt the investment management industry.”

See also: – Q&A with Mercer: ‘Young people’s sustainable values are an inspiration’

The research also found 81% of existing investors want to see their fund manager divest from companies that cause environmental or social harm, which rises to 91% of new investors. Additionally, 78% said financial providers need to do more to help to combat the climate crisis, and 56% reported COP26 spurred greater consideration of how their investments impact the planet. 

Meanwhile, 82% (rising to 92% of new investors) expressed they wanted their fund manager to engage with the companies they invest in directly on issues such as social impact and sustainability.

Generation of impact investors

Tridos also said a “new generation of purpose-led investors” had emerged in the past year with the new investors indicating positive social and environmental impact was a greater priority – almost half (48%) of the new investors are under 35 and three-quarters are under 45.

Furthermore, 63% said they would be happy to settle for lower returns to invest in industries they believe in.

The number of investors saying they would choose a financial provider based on whether their ESG credentials aligned with their own personal values has increased from 14% to 21%.

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.”

Michael Kind, senior campaigns manager at ShareAction, commented the increasing numbers of retail investors understanding the impact their money has on the world is not a surprised, as more and more recognise that impact on people and planet is just as important as returns.

“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.”

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Natalie Kenway

Natalie is global head of ESG insight for ESG Clarity and has been an investment journalist for 16 years. She won Editor of the Year at the Aviva Investors Sustainability Media Awards 2021, and was Winner...