Retail investors still keen on ESG funds, research finds

Research suggests that 15% of UK retail investors are planning to increase their allocation to funds that have a strong environmental, social, and governance (ESG) stance, with a further 45% considering the move. 

ESG funds can help investors avoid missing out on returns of between 4% and 5% a year, according to Oxford Risk, the financial behaviour experts that carried out the research.

Data from the survey of 1,036 retail investors shows that investors are more prepared to invest if they feel they are getting social and emotional benefits from investing, alongside financial ones. 

It says advisers can use ESG investing to help address the discomfort of investing, encouraging them to put their wealth to work, and thereby deliver better service for clients. 

Oxford Risk suggests that ESG plays such an important role for investors, with 7% saying they place a greater emphasis on those credentials than fees when reviewing potential funds, and 38% saying they place equal importance to both.  

Greg Davies, who is head of behavioural finance at Oxford Risk, said the biggest behavioural cost to investing is leaving large amounts of cash because you are not emotionally comfortable investing it. 

He added, “Wealth managers and fund management groups can use ESG to persuade more retail investors to invest in stock market related products.” 

The research was carried out for Oxford Risk by Consumer Intelligence between 13 and 15 August 2021, with the research sample weighted to reflect the demographic profile of the UK.