HNWIs Sceptical About ESG Investments

ESG Investment

High-net worth individuals (HNWIs) believe that climate change is one of the biggest risks to their wealth, according to a recent study.

While most consider investing in Environmental, Social, and Governance (ESG) stocks, scepticism remains around the notable difference that green investments can make to the environment and society in general.

The Saltus Wealth Index by investment management and financial planning company Saltus, asked respondents a range of questions concerning the economy, personal finances and lifestyle. The survey was conducted at the end of August 2021. It included over 1,000 respondents of all ages and from all over the UK, with investable assets over £250,000.

Although age, life stage and location had an impact on the views and feelings of HNWIs, climate change was highlighted as a significant overall concern.

Are younger HNWIs becoming greener?

According to the research, 64% of HNWIs surveyed said they actively invest in ESG, green or impact funds. However, the desire to make greener investment choices varies between age groups.

It seems the younger generation have a stronger drive to do so, as 80% of those aged between 18 and 24 are investing in green stocks. The survey also revealed that 40% think that they care more about ESG than their parents’ generation.

When it comes to the older generation, this number falls — just 24% of those aged over 65 invest in ESG and 38% believe that their children care more about greener choices than they do.

The number of those investing in ESG funds can be broken down by age, as follows:

  • Age 18-24 — 80%
  • Age 25-34 — 74%
  • Age 35-44 — 67%
  • Age 45-54 — 68%
  • Age 55-64 — 48%
  • Age 65+ — 24%

According to the Saltus Wealth Index, climate change was less of a worry for the older generation, as only 11% of over 65s stated it was a major concern, compared to 24% of those under 25 who considered it a significant risk to their wealth.

Overall, 21% of all the respondents claimed climate change was a concern when it came their wealth. But other significant worries amongst HNWIs included:

  • COVID-19 (31%)
  • Inflation (28%)
  • Low interest rates (24%)
  • Brexit (24%)

Mistrust in ESG investments

HNWIs are still sceptical about ESG investing, and the main reason for those who don’t yet invest in impact or green stocks, came down to the fact they don’t generate sufficient returns (31% of respondents).

Again, this figure varies between age groups. For those under 25, this appears to be a minor issue, with just 11% citing this reason. Instead, the younger generation were concerned with the difference green investments can make — almost half (44%) of under 25s said they don’t think it does. The same number of HNWIs in that age group believed that green funds are not truly environmentally friendly.

This is more than the overall consensus of all the HNWIs surveyed, as just 27% believe that ESG investments don’t make a difference, and 22% stated they do not think green funds are fully environmentally friendly.

With a balance between the ethics of ESG investments and the potential for returns, it’s possible that those who are have grasped this successfully have engaged with the right financial advice.

In addition, with concerns over climate change, inflation and post-pandemic uncertainty, consulting with an adviser to formulate a financial plan is perhaps more important now than ever before.

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