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Close Bros AM: UK investors becoming more responsible with their money, but confusion reigns over terminology

Close Brothers Asset Management’s new report on responsible investing has revealed that while investors are more likely to prioritise responsible investment than traditional returns, there’s still a stark knowledge gap when it comes to investment terminology. Not even one in five (18%)  investors know what the term ‘SRI’ means, and three quarters of investors aren’t confident in their understanding of ‘impact investing’, ‘ethical screening’, ‘greenwashing’ or the ‘UN Sustainable Development Goals’.

  • Nearly two thirds of UK investors prioritise responsible investing over ‘traditional’ investing, according to new research from Close Brothers Asset Management

  • However, terms like ‘ESG’ (Environmental, Social and Governance), ‘SRI’ (Socially Responsible Investing) and ‘impact investing’ cause confusion, particularly amongst older investors

Nearly two thirds (65%) of investors prioritise responsible investing over a desire to ‘simply maximise’ their financial return, according to new research by Close Brothers Asset Management.

In the recent survey of more than 2,000 UK investors, who currently have a mean average of £320,000 invested, just 35% identified as ‘traditional’ by answering that ‘my only priority is to maximise my financial return’. Notably, there is a gender divide, with 40% of male investors considering themselves traditional, compared to 31% of women.

The study also examined whether investors think that they need to sacrifice financial returns in order to invest sustainably. The conclusion is stark, with an overwhelming 85% believing that investing sustainably will either improve, or provide the same returns, as traditional investing.

However, despite the growth of interest and awareness of responsible investing, there is a significant knowledge gap when it comes with the vocabulary associated with it.

Not even one in five (18%)  investors know what the term ‘SRI’ means, and three quarters of investors aren’t confident in their understanding of ‘impact investing’, ‘ethical screening’, ‘greenwashing’ or the ‘UN Sustainable Development Goals’. The most understood term is the catch all of ‘responsible investing’, with 39% of investors confident that they know what it means.

Overall, the research found that younger investors are more confident in their understanding of these terms. Similarly, investors who use a financial adviser were more likely to understand each term, compared to those who don’t.

Close Brothers Asset Management commissioned the research to help advisers tackle the growing appetite for responsible investing and assist their conversations with clients. The full research findings can be found at https://www.closebrothersam.com/responsible-investing-survey-2021

Darren Saddler, Head of Investment Business Development at Close Brothers Asset Management, comments: “This research demonstrates what many have suspected for some time. Significant numbers of UK investors prioritise responsible investing, but their understanding around it is very limited.

“This should be of concern to the industry as our findings point to a significant knowledge gap in a world where terminology is critically important.

“While it is reassuring that those investors who have a financial adviser are more likely to understand key terms like ESG and SRI, the fact is far too few have a real grasp of these phrases.

“It is vital that advisers are able to meet the demand for responsible investing while also being able to clarify industry jargon for their clients, so they can make informed decisions moving forward.”

 

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