“Expert” investors believe sustainable investing is a key for long-term returns

Global “expert” investors are more likely to believe that investing sustainably is key to driving long-term returns compared with their peers who rate themselves as less knowledgeable, research by Schroders has found.

The sustainability-focused findings of the Schroders Global Investor Study 2022 surveyed over 23,000 people who invest from 33 locations globally including 500 from Hong Kong.

How important is a sustainable approach to long-term returns?

More than two-thirds (68%) of people globally who class themselves as having “expert/advanced” investment knowledge believe sustainable investment is the only way to ensure profitability in the long term.

This compares with 52% of those who believe they have “beginner/rudimentary” investment knowledge and 43% of ”intermediate” investors.

^{(The charts above indicate the global findings of Schroders’ Global Investor Study 2022)}

What draws people to sustainable investments?

Similarly, 69% of “expert” investors around the world share the view that investing sustainably can support positive change when it comes to challenges such as climate change.

For Hong Kong investors, environmental impact remains the most attractive feature of sustainable funds (51%), followed by alignment with their societal principles (38%). 

^{(The charts above indicate the global findings of Schroders’ Global Investor Study 2022)}

Hannah Simon, Schroders’ Head of Sustainability Strategy, says: “This is encouraging to see and further emphasises the crucial role asset managers and advisers have to play in helping investors better understand how investing sustainably can not only help overcome challenges such as climate change, but also support their long-term returns.”

She continues: “Indeed, we see an intrinsic link between long-term sustainable investment returns and solutions to some of the world’s social and environmental challenges.”

What types of funds are investors most drawn to?

A focus on delivering financial returns unsurprisingly remains a priority for many investors. More than half (54%) in Hong Kong seek funds that focus primarily on delivering financial returns while integrating sustainability factors.

There are similarities with investors in Asia (61%) and the Americas (60%), while people in Europe were more likely to choose a fund with sustainability characteristics (51%).

What would encourage people to increase their sustainable investments?

As well as the ability to choose investments aligned to their personal sustainability preferences, close to half of investors (48%) globally and more than one third (38%) in Hong Kong said more education around sustainable investing would encourage them to allocate more sustainably. The lack of transparency and reported data from providers about the impact of sustainable investments (70%) was cited as one of the most significant barriers to investing sustainably in Hong Kong, compared to 51% around the world.

Andy Howard, Global Head of Sustainable Investment at Schroders, says of the overall findings: “This year’s survey results show that environmental challenges remain one of the key reasons individuals are looking to invest sustainably. However, the focus on the ‘S’ in ‘ESG’ can’t be forgotten, with human capital, education and equality all top of people’s investment priorities.”

“Financial education is a key element in driving more capital towards sustainable investing. It is clear from our research that what people seek is essentially guidance and clarity. The more people are able to understand what they are investing in and their impact on society and the environment, and the relationship to portfolio returns, the more capital we should see flowing into sustainable investing.”

“That is why, each quarter, Schroders provides an update on the themes shaping the sustainability landscape. These reports have been created to demonstrate our commitment to integrating ESG factors into the firm’s investment processes.”