Environmental, social and governance (ESG) factors have become a key consideration for investors, but more education is needed around terminology, new research from Standard Life Aberdeen has revealed.
The findings showed 47% of people surveyed want their money invested in firms that positively impact society, while half (50%) want their money invested in firms that behave ethically.
Standard Life Aberdeen also said nearly three quarters (72%) see risk as a critical factor when making investment decisions and a similar number (70%) considered charges a key concern.
Stephen Owen, solution delivery director at Standard Life Aberdeen, said: “It is understandable that risk is the most important factor for many, especially after a year of such market volatility.
“However, it’s clear that ESG considerations are growing to become an important consideration for investors.”
Yet, despite the growing demand for more environmentally-friendly investments, Standard Life Aberdeen’s research also found that more than a third (35%) of investors are still not familiar with ESG, with women more likely (43%) not to have heard of it.
When asked how much they knew about ESG, less than a third (29%) of women said they understood the term, while almost half (46%) of men said they did.
Owen added: “People increasingly want to make investments that align with their personal beliefs, including factors such as environmental, sustainable and ethical behaviour.
“For some, ESG is an unfamiliar term, but the principles that underpin it certainly won’t be and we know there is more work to be done to address this.
“Advisers can play a key role in helping investors understand terminology around investing and make investment decisions that match their convictions, and as ESG gains momentum, advice around the topic will become vital in the near future.”
