Cicero LP

Methodology

The survey was conducted in October 2023 and the findings of this report are based on the views of 12,000 consumers in 12 markets across Europe and Asia. The sample collected is nationally representative of age and gender within each country. This is the second wave of our study following the initial survey in 2021. This allowed us to make comparisons and identify where and how views may have shifted over the last couple years.

At AXA IM, we are committed to responsible investing and supporting the transition to sustainable economies. As long-term custodians of wealth, we strive to identify and back environmental, social and governance (ESG) leaders that can protect and grow client portfolios. In doing so, we believe that understanding customer perspectives is paramount, which is why we carried out this extensive study on individual views toward ESG investing across various markets, regions, and demographics.

Introduction

ESG investing: a global investor study

Key findings

Retail investor ownership of ESG funds has decreased slightly over the previous two years, though we can be cautiously optimistic about the future, with investors keen to add ESG funds into their portfolio. 31% of those holding investments state they own funds which can be categorised as either ethical or ESG. This is broadly comparable, but slightly lower, than the 33% recorded in 2021. 42% of non-ESG investors in Asia and 30% in Europe are considering adding ESG funds into their portfolio – though this represents a 4% decline from 2021 in both regions.

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Further reading

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Key findings summary

Our research resulted in 5 key themes, watch this short video for a quick overview of our findings

Section 1 : How do ESG funds resonate with investors today?

Our survey suggests that investors also remain sensitive to product fees while being increasingly doubtful of the potential for ESG funds to perform strongly. Overall, 86% of investors that own or are considering ESG funds state that the associated fees were a very / fairly significant factor in their decision making – with over one-in-three stating it was a very significant factor. Almost three-in-five investors (60%) would be willing to pay higher fees to invest in an ESG fund that aims to combine positive returns, while simultaneously promoting the ethical management of businesses and a beneficial impact on society and the environment. Across investors who would not consider an ESG fund, a lack of belief in the strength of investment returns is the key barrier for investors across both Europe (25% - up from 21% in 2021) and Asia (35% - up from 27% in 2021).

Section 2 : The financial underpinnings of ESG product offers

Our research shows clear gaps in retail investor awareness and understanding of the range of sustainable investment approaches and in the very funds that they hold in their portfolio. Furthermore, advised investors display no significantly improved understanding. Only a minority of retail investors have heard of the term ‘ESG’ – 26% among European investors and 47% among Asian investors. Only 26% of European investors and 33% of Asian investors that currently hold ESG funds in their portfolio feel fully aware of the ESG aims and objectives of these funds. The number of adviser initiated ESG conversations has dropped from XX% to 40% since 2021 (from 38% to 35% in Europe and from 42% to 40% in Asia).

Section 3 : The investor knowledge gap

While our findings show the need to be clearer in communications with retail investors about the nature, aims and characteristics of ESG funds, there is also investor demand to supply that clarity. 71% of European investors agree that ESG funds must clearly disclose the specific measures / indicators that are taken into account. This rises to 78% among Asian investors. 77% of European investors and 81% of Asian investors agree that all companies within any ESG fund should have to report on the same consistent measures to ensure comparability. 64% of European investors and 77% of Asian investors are concerned about the potential mis-selling of ESG funds – an increase from the 61% and 71% respectively recorded in 2021.

Section 4 : Getting under the bonnet

Investors place high levels of importance across the entire range of environmental, social and governance factors covered within our study. Even the least important of these are regarded as an important consideration for a majority of investors. Data protection and transparent accounting are the top two ESG factors deemed as important by investors in all markets – with the sole exception of Germany (Data protection and Fair pricing). On environmental factors, investors place greater emphasis on marine life conservation and avoiding waste water than they do on cutting pollution and carbon emissions. In relative terms, social factors are more important to retail investors in Asia than they are in Europe, where supporting healthy lives and wellbeing feature strongly.

Section 5 : ESG funds - What investors want to see

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12,000 individuals

12 countries

Investors place high levels of importance across the entire range of environmental, social and governance factors covered within our study. Even the least important of these are regarded as an important consideration for a majority of investors. Data protection and transparent accounting are the top two ESG factors deemed as important by investors in all markets – with the sole exception of Spain. On environmental factors, investors place greater emphasis on marine life conservation and avoiding waste water than they do on cutting pollution and carbon emissions. In relative terms, social factors are more important to retail investors in Asia than they are in Europe, where supporting healthy lives and wellbeing feature strongly.

Section 5 : ESG funds - What investors want to see

Over two-in-three retail investors globally (68%) feel that it is important for their own ethical views to be taken into consideration when making an investment.

In 2023, only 37% of investors expect an ESGfund to outperform anon-ESG fund with acomparable risk profile– a steep drop of 11%from the 48% recordedin 2021.

Among those investors that have had a conversation with their financial advisor about ESG or responsible investment, still only 30% feel fully aware of the ESG aims and objectives of these funds.

79% of investors globally agree that it should be compulsory for investors to receive detailed information on how the companies they are invested in perform across ESG criteria.

A majority of investors globally are most likely to highlight deforestation (59%), pornography (58%), weapons manufacturer (57%) and heavy polluting industries (56%) as no-go sectors.