ESG Investment Demand Falls On Greenwashing Fears

The annual ESG Attitudes Tracker was published earlier this week by the Association of Investment Companies.

The survey found that in:

• 2012 – 48% of consumers questioned were not convinced by ESG fund manager claims on the ethical and equitable position of their funds.
• 2022 – This increased to 58% of consumers not trusting ESG fund claims and in
• 2023 – This had increased to a staggering 63% of consumers.

Many suggest that ‘greenwashing’ i.e., claiming to be greener than they are is the biggest fear.

Comment

The demand for ESG and pressure on both fund managers and financial advisers to promote environmentally friendly investing by the Financial Conduct Authority (filtering down from government and the Paris Climate Agreement) has pushed too many people into a market that is unproven and with a lack of quality stocks at present.

We have no doubt that ESG will come good but investor losses over the last year or so have been greater than non ESG portfolio losses.  That said, they will come good as we suggest but perhaps a 5–10-year medium term view is needed.

By way of example, we saw a story recently where an offshore windfarm in the Torbay area will be completed in 2024 but there is a 6-year backlog to plug this into the National Grid.  That’s 6 years before a profit stream will come from the wind farm and be on stream for fund managers that invested in the project.

We suggest those that are already ESG invested should hold for the medium term and if you are looking to invest in a socially responsible way you should consider funds that are ‘making progress in sector’ via tilt funds i.e., they are gradually switching to greener investments over time.