Environmentally friendly, socially responsible, and corporate governance (ESG) investing or sustainable and green investment is falling out of favour according to the latest Schroeder ‘Active Pulse’ survey.
This part of the survey is a barometer for client demand via financial advisers for investing in a sustainable manner. The survey reached out to 180 financial advisers from 150 firms and found that in November 2022, 51% of clients were happy to discuss sustainable investing compared to 32% of investing clients today.
Advisers are also more pessimistic than they were about sustainable investing with 37% becoming more sceptical despite 27% of advisers suggesting demand has not changed.
That said, 13% of clients are still raising sustainable investment without being prompted, this is an increase from 10%.
Why the increased demand over the last few years?
Why the fall in demand and interest?
By way of an example, not far from our head office in Cornwall, there is a wind farm development in Torbay (Devon) that is due for completion in 2024. Sadly, this valuable source of sustainable energy must wait to be plugged into the National Grid as there is currently a backlog of 5 years. In short, real revenue and profit for the investment made over the last few years may not ‘come on stream’ for another 5 years. This is perhaps an example of why investment returns for ESG funds are negative at present.
Short term – we cannot see things improving.
Medium and longer term – we are confident of strong capital growth and income as projects come on stream over the coming years.
In 15 years or so, we will likely look back and wonder why we ever worried about ESG investing as it will then be mainstream and part of the DNA of the country rather than a new, growing industry, much in the same way as the ‘dotcom bubble’ concerns in the ‘noughties’, where now technology dominates our everyday lives and more so now with Artificial Intelligence being invested in heavily by many firms globally.