A survey by Smith & Williamson Investment Management shows a 20% increase in ESG investing from high new worth individuals.

4 in 10 high net worth individuals say they are now more likely to consider ESG in their investment decisions compared with the start of 2020 – a rise of 20%. However, only 22% would remain responsibly invested in the event of a sector downturn and a potential drop in returns.

The continued increase in ESG-focused investment could be set to rise further in 2021. Nearly two thirds of respondents (65%) said they are more likely to invest in ESG in the future, and almost a half (46%) said they would increase the weighting of responsible investments in 2021 if they had the option.

However, despite this growing interest there is still a significant number of investors who do not believe ESG investing can make an impact. 36% of high net worth individuals do not believe ESG investing leads to positive change and more than two fifths believe ESG is a ‘fad’.

High net worth individuals are also more likely to prioritise returns over remaining responsibly invested in the event of a market downturn – only 22% would remain responsibly invested if there was a risk to returns.

Commenting on the findings of the survey, Nick Murphy, Partner, Smith & Williamson Investment Management, said: “Responding to calls to invest in a better society is the challenge of our generation. The magnitude of investment and the speed of change needed to rebuild our economies based on carbon neutral energy is vast.

“It is reassuring to see individuals becoming increasingly attentive of the need to address ESG issues through their investment decisions. It demonstrates that this is the unassailable direction of travel, but we need to urgently fix some key issues to foster lasting change in investing preferences for the greater societal good. The first is the need to improve the quality of ESG data and information, which currently varies between companies, sectors and countries, by adopting global reporting standards.

“Secondly, governments need to continue to tilt the playing field to make early adaption attractive to private finance by removing some of the uncertainties and reflecting the true cost of emissions in pricing. They must reduce the barriers to green investment. The third is to galvanise global markets, making sure every investment decision takes climate into consideration. Finally, we need to encourage genuine innovation such as in long-term seasonal energy storage that lasts between summer and winter, green hydrogen and bio fuels for air travel.”