Over 60% of investors would pull out of a fund that was not living up to its own sustainability credentials, research has found.
The survey by communications agency Engine MHP also found one in eight people were ready to withdraw their cash as quickly as possible upon finding a fund did not meet their sustainability expectations.
A further 17% said they would take their time and seek advice from a professional to find other options. Those who would not take any significant action on potential greenwashing made up 17% of respondents and another 6% said they would take no action.
Investor expectations
The survey – covering 2,000 adults in the UK, over half of which were active investors – found respondents’ expectations were mismatched with what they observed in sustainable funds.
In the case of a global equities fund labelled “ethical” that invests in a luxury goods company allegedly procuring cotton produced by forced labour in China, 53% of respondents said they would not have expected to see this holding in the fund.
When asked about an ESG ETF investing in an oil company that is due to increase annual CO2 emissions by 100 million tonnes by 2025, 44% did not agree this holding was suitable for the type of fund.
When looking at investors’ perceptions of funds and fund labels, Engine MHP discovered less than half, 43%, of respondents believed an ESG ETF would be truly sustainable and half believed an ethical sector global equities fund would be sustainable. The company stated this shows “deep scepticism” for such offerings.
Communication challenge
Nick Woods, Engine MHP’s head of financial services, said: “Although some people hold financial returns as their only objective for investing, there is clearly a growing group who are looking to see their sustainable beliefs reflected in the way their money is managed.
“The fund management industry now faces the issue of giving investors the level of information they need to find funds that invest in line with their priorities, in an accessible and easy-to-understand manner.
“Our research shows that current labels and descriptions are not yet sufficient and with an increasing number of investors threatening to vote with their feet, addressing this critical communications challenge must be a key focus for the industry.”
