Demand for ESG investing is waning amid fears of greenwashing, new research from the Association of Investment Companies has shown.
According to the annual ESG Attitudes Tracker, just over half (53%) of investors consider ESG factors when investing, down from 65% in 2021 and 60% in 2022.
Among the 47% of investors who do not consider ESG factors when investing, the leading reason was prioritising performance over ESG issues, followed by not being convinced by ESG claims from asset managers.
In fact, nearly two thirds (63%) say they are concerned about greenwashing, up from 48% who reported the same in 2021 and 58% in 2022. When asked what should be done to address greenwashing, respondents cited a standardised verification by a reputable third party, greater transparency and industry regulation.
Richard Stone, chief executive of the Association of Investment Companies, said: “Our ESG Attitudes Tracker suggests that 2021 may have been a high point for enthusiasm about ESG investing. There is plenty of residual support for the concept but concerns about greenwashing are increasingly dominating private investors’ mindsets.
“These findings underline the importance of the regulator getting disclosure rules right, in particular the new labelling regime. A new regime with high standards that investors can rely on is essential for helping investors who care about ESG find products that align with their values and beliefs.”
According to the tracker, the poor performance of ESG mandates over the last two years may also have had an impact. Only 22% of investors now think ESG investing is likely to improve performance compared to 33% in 2021 and 24% think it will hurt performance, up from 20% two years ago.
One in three (30%) investors believe that ESG investing is likely to lead to higher risk, more than double the 14% who think it will lead to lower risk.
Despite this, there is also a minority of investors for whom ESG issues are extremely important. When asked whether they are a “fan of investments that consider ESG factors”, nearly a fifth (19%) of investors strongly agreed.
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