Less than a third (31%) of investors over 65 years old consider ESG when making investment decisions, compared to 65% of those under 45, new research from the Association of Investment Companies (AIC) has suggested.
According to the latest edition of the AIC’s ESG Attitudes Tracker, this is the biggest ‘generation gap’ recorded to date, at 34 percentage points, up from 32 percentage points last year.
The overall percentage of investors who say they consider ESG when investing now stands at 45%, down from 53% last year.
“Since launching this research in 2021, we’ve seen the initial excitement around ESG investing fade,” commented Nick Britton, research director, AIC. “The main factor has been poor performance and depressed expectations for future performance, but there’s also confusion about what ESG stands for and how it’s incorporated into investing.
“What we haven’t seen before is such a big generation gap between investors under 45 and those aged 65 or more. This isn’t because older investors care less about sustainability – it’s often important to them in their everyday life. But most find the notion of ‘ESG investing’ less appealing. By contrast, younger investors are often interested in making investments that align with their values and are much more likely to be fans of ESG investing.”
‘Poor performance’
Among the key findings of the report is that ESG investing is increasingly associated with ‘poor performance’ by both private investors and intermediaries, such as advisers and wealth managers.
Just 16% of private investors believe ESG investing will improve investment performance, while around a third (32%) believe it will hinder performance. Among intermediaries, including financial advisers and wealth managers, 11% expect ESG to improve returns, while 60% expect it to worsen them.
Despite this, close to two thirds (63%) of private investors said they have at least some allocation to sustainable funds, while 92% of intermediaries recommend sustainable funds to clients.
Elsewhere, the research found that the ‘G’ in ESG is becoming increasingly important to investors, with governance issues considered important to 41% of respondents, compared with 37% for environmental issues and 29% for social issues.
Transparency and disclosure was cited as the most important individual ESG issue by 62% of respondents, followed by climate change (42%) and human rights (42%).
The Trump effect
Finally, the research also examined the effect of US president Donald Trump’s attitude towards ESG, with two thirds (65%) of private investors saying that his position had ‘no impact’ on their attitude, while 21% said that they were more favourable towards ESG as a result of Trump, and 7% said they had become less favourable.
The study was based on online surveys of 400 private investors and 200 intermediaries, alongside 12 in-depth interviews. Read more here.
