Investors attracted by non-financial factors

By Mark Hinds, Charles Stanley Wealth Managers

Having a clear purpose and positive impact on the planet has been brought into sharper focus by Covid-19.

Published in Norfolk Director Magazine Autumn/Winter2020
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Under the spotlight

Businesses are facing changing expectations and non-financial factors are becoming increasingly business critical for appealing to investors.

Every aspect of a business is in the spotlight like never before, from how you treat your employees, your supply chain, right through to your environmental credentials. Non-financial factors such as ESG (Environmental, Social and Governance) must be embedded in your strategy and the ESG rating of your business is increasingly critical for investors and will determine who will, and can do, business with you in the future.

According to research by Charles Stanley into investor attitudes towards Socially Responsible Investing (SRI), almost half of UK investors expect to increase their exposure to ESG investments over the next three years, with one in six planning to do so significantly.

SRI awareness and exposure increasing

Among UK adults currently with an investment portfolio, 43% say they have exposure to SRI with a clear trend that this is much more likely among younger investors. Nearly one in five UK adults say their awareness of SRI has increased over the last 12 months, and a similar number expect to significantly increase their exposure to SRI over the next three years.

Why people are choosing SRI

Our research shows that for those that currently had an investment portfolio, the most popular key factors for choosing SRI are, creating a more sustainable world for future generations, delivering better returns, and influencing company behaviour. However, the findings are clear that the key to unleashing the power of SRI is delivering on both profits and principles. Among those surveyed that didn’t have SRI represented in their portfolio, the top factors that would induce a change, were a more attractive yield, lower fees and tax incentives. It’s often assumed that SRI means sacrificing performance, but Charles Stanley’s analysis found that’s not necessarily the case. Investors have been significantly more likely to generate outperformance over the past three, five and 10 years from ethical or sustainable funds than from standard funds.

SRI needs to become the norm

There continues to be a significant movement toward SRI among UK investors. But while awareness and appetite are increasing, more needs to be done to complete the shift from niche investing to the mainstream. Not only is it important that returns from SRI are able to adequately contribute to a long-term investment strategy, it’s also essential to demonstrate the positive impact this type of investing can have. Getting this right will enable investors to put their money to work, safe in the knowledge that it’s delivering for the global good as well as their financial future.

Past performance is not a reliable guide to future returns. The value of investments, and any income derived from them, can fall as well as rise. Investors may get back less than originally invested.

Charles Stanley & Co. Limited is authorised and regulated by the Financial Conduct Authority.

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Mark Hinds is Branch Manager and Investment Manager at Charles Stanley Norwich. To find out how Charles Stanley could help you create a more secure financial future, arrange your free consultation with a member of the Norwich team.
T: 01603 856 932  or visit charles-stanley.co.uk/norwich-office

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