Help them buy your ESG funds

The Client

The UK Sustainable Investment and Finance Association (UKSIF) is the leading membership organisation for sustainable and responsible finance in the UK. It represents a diverse range of financial services firms committed to these aims, and our 270+ members, managing over £10trn in assets under management (AUM), include investment managers, pension funds, banks, financial advisers, research providers, NGOs, among others.

Good Money Week is an annual week-long campaign, held by UKSIF to raise public awareness to sustainable investment practices, and supports association members in promoting their ESG products and services.

In 2020, UKSIF commissioned a YouGov survey ahead of its event and discovered only 9% of the UK public consider it important to invest money ethically, and 84% are willing to accept investing in something that is unethical or countered their beliefs.

While a survey offers a snapshot view of popular thinking, it offers little insight as to why audience members responded the way they have, or whether their responses change over time.

To better understand views of retail investors, UKSIF commissioned FinText to provide bespoke market research on investor attitudes towards ethical investing, using social listening.

We wanted to discover whether private investors are speaking the same language as sustainable finance providers and ask if these types of strategies are really making it into the mainstream. Or is the industry still in a bubble?

UKSIF

The solution: Social listening

Digital communities offer real-time insights of engaged, self-directed investors. At the time, some of Reddit’s investor communities, including ‘r/Investing’ have been incredibly responsive to market volatility.

Like a series of targeted focus groups, social listening to online conversations reveals what people are really thinking. With Social Listening, marketers uncover unique insights, enabling them to create content that speaks directly to clients’ concerns and desires.

The research analysed investor conversations on the Reddit ‘Investing’ community between January 2019 and August 2020. The research spans all discussions with the terms ‘ESG’, ‘Ethical Investing’ or ‘SRI’ , in which the terms were relevant to the topic. (Including variations: ‘Ethical Investing’ would include ‘investing ethically’, ‘moral investments’, ‘ethical stocks’ etc. )

The research covered all meaningful discussions on sustainable investing in the community over the surveyed period. These consist of 74 conversations, and a total of 2347 responses.

Findings

1. Investors use the term ESG more than Ethical Investing or SRI.

Among the three terms, ESG is the most pervasive, appearing at least once in 86% of the conversations analysed, followed by Ethical Investing.

The analysis also found Ethical Investing is the highest co-occurring term: 46% of discussions featuring the term ESG also feature reference to Ethical Investing. For Social and Responsible Investing (SRI), nearly all of its appearances are alongside ESG or Ethical Investing, suggesting it’s not the go-to phrase for investors discussing ESG products.

2. Investors raise three consistent objections to ESG investing.

The resistance to invest ethically manifests in three consistent objections, and our research identified in what portion of investor conversations each objection was raised at least once:

Investors’ most common concerns is returns, followed by skepticism over investment products’ qualifying criteria for ESG companies.

The third objection is concern over lack of impact. Users have been persistent in arguing there’s little societal impact in ESG products, since buying or selling a company’s stock in the secondary market rarely influences the company itself.

I care about the ethics of a company, but whether I own them or not makes no difference.
I’d be sacrificing my returns that cause no impact because someone else will hold the shares anyway.

What I think would create an impact is if I can stop their projects (by having controlling shares), limit their funding (stopping their financing with banks), or boycott their products/services. Out of the three, I only have one option.

Private Investor, doubting impact

3. What buyers say in favour of ESG

Some investors are enthusiastic about ESG . In alignment with the UKSIF survey, they’re still a minority within the overall conversation.

Nonetheless, these clients are great at articulating where they see the value in ESG investing: One, that ethical investments are worthwhile despite possible lower returns. And, Two, that ethical investments will ultimately deliver superior returns.

Lots of people involve their morals when investing, and there’s nothing specifically “wrong” with that. You could make the argument that investing according to your morals is a financially good strategy, because if everyone ultimately adopts your morals, then you’ll be ahead of the game on those investments.

Private Investor, sees superior returns potential

You quite literally vote with your money. Buying shares raises the value of the company, and finances its endeavours. Ethics do play a role in my investment strategy. There are companies I refuse to invest into, no matter how well they do. There’s a chance I’m losing potential profit by doing this, but doing the right thing sometimes bears a cost.

Private Investor, applies ethics to investing

The Outcomes

The findings were discussed at length in UKSIF’s Clean Slate, Green Slate: Public and Investor Attitudes To Good Money 2020 report, which advises ESG product providers on improving communications for retail audiences, by addressing the objections investors are raising.

The report was distributed to UKSIF’s members, mostly investment companies offering ESG funds. Findings were also discussed in dedicated panel titled Communicating ESG & Identifying Greenwash, at Good Money Week 2020’s flagship industry event.

In Their Words

FinText was able to find a large sample of the right people and get us raw, honest answers to our questions. Beyond data science, we found the team had a deep understanding of the investment industry, and its marketing challenges.

UKSIF members have great answers to all the objections raised and have a real opportunity, as the leaders, to be the first to welcome and serve these potential clients.

Charlene Cranny, Communications Director, UKSIF