Overly complicated industry jargon is preventing investors from funneling their money into sustainable products and companies, despite the fact that an increasing number want to, according to new data from The Wisdom Council.
The study found that a lack of familiarity with the different types of so-called ethical investments was one of the key drivers behind investors’ lack of engagement with this burgeoning sector of the industry.
Of the 1,000 respondents surveyed, 23% said they could not see themselves investing in an “ethical” branded fund within the next 12 months because they didn’t know enough about it. Roughly 24% said the same about vehicles labelled “green,” “impact” or “environmental, social and governance” (ESG).
Much of this lack of understanding has to do with the language or branding surrounding ethical products.
During the qualitative phase of the Wisdom Council’s study, the team noted through conversations with groups of investors that certain labels were more confusing than others.
The concept of ESG investing proved the most challenging to unpack, with investors more likely to recognise descriptors like “green” and “ethical”.
Months later, The Wisdom Council published an online survey, which broke down the different types of responsible investments in consumer-friendly language.
When clearly articulated, 80% of respondents said they wanted to find out more about at least one of the sustainable concepts (ESG, green, impact, ethical) mentioned.
That figure was even higher (nine out of 10) when the sample was isolated to just millennial investors.
“Responsible investing resonated with the majority of retail investors once it was explained in terms that they could understand,” said Anna Lane, chief executive of The Wisdom Council.
“Socially responsible behaviours are becoming the norm – green and ethical issues have moved in to the mainstream, while ESG and impact investing tap in to a growing social awareness and desire to effect change.
“This comes through most clearly with younger investors – if we can help millennials to understand how responsible investing harnesses some of the causes they care so passionately about, it could be the key to engaging with them on long-term saving and investing.”
