To mark the launch of our new report—”The ESG Awareness Gap: What’s stopping UK investors from putting their money where their values are?”— Atalanta recently hosted a panel discussion at Opinium Research HQ with Opinium’s Alexa Nightingale, GaiaLens’ Sebastien Kirk, and ESG Investor’s Vibeka Mair.
The discussion delved into the factors driving the lack of awareness of ESG investing amongst UK retail investors—and the implications this could have for the sector’s growth. Here are the five key takeaways from our discussion:
Is the term “ESG” fit for purpose?
Vibeka kicked off the session with some intriguing food for thought: “Should we stop using the term ESG altogether?” She noted that the term has become “very loaded, and even toxic, at the moment.”
Echoing these thoughts, Atalanta’s CEO & Founder Eva Barboni explained that ESG investing has been in the press a lot over the past year—and not always for positive reasons. She explained that this is having a profound impact across the pond, which could soon extend to the UK.
“The rising backlash against ESG investing in the US is partly due to high-profile scandals combined with a difficult macroeconomic environment.”
— Eva Barboni, Atalanta
These recent challenges could be denting confidence amongst retail investors. As Eva suggests, “there’s no denying that momentum in the space has flipped over the past year because of these challenges.”
Combatting jargon and building trust
Our research clearly shows that the ESG investment landscape is difficult for retail investors to navigate. And as the panel discussion progressed, it became clear that one of the main reasons for this is the confusing jargon used by asset managers and financial advisors.
“The industry loves jargon.”
— Sebastien Kirk, GaiaLens
Much of the language used to describe ESG investing is geared towards an expert audience of institutional investors, explained GaiaLens’ Sebastien Kirk.
The terms used to describe ESG are often multi-faceted, because, as Sebastien notes ESG “is different for every person and every purpose,” and ESG itself “is three massively different concepts.”
In line with this, the ratings and benchmarks used to measure the impact of ESG investments are equally multi-faceted. Sebastien noted that instead of a “one-stop shop”, where you “wrap it all together into one rating” or “one score,” ESG ratings should “just be the start of the conversation”.
The importance of educating retail investors
Compared to institutional investors, retail investors have limited time and capacity to look past the ratings and dig into the underlying data. So asset managers and financial advisors need to place a stronger focus on educating them.
Our research showed that two of the biggest factors that could encourage retail investors to increase their allocations to ESG investments were a good performance track record and evidence that ESG investing has an impact.
Clear communications about performance and impact are therefore critical for encouraging retail investors to invest in ESG funds, noted Opinium’s Alexa Nightingale.
“If we can’t show the evidence that investors are making an impact then it’s a very tough sell to entice more investors into the market.”
— Alexa Nightingale, Opinium Research
The panel also discussed the role that digital tools and platforms can play in demystifying ESG and helping investors choose between financial products.
Women investors’ approach to ESG
The report revealed that while awareness of ESG investing among women investors is lower than their male counterparts, their level of interest is higher; 55 percent of the women surveyed reported that they are interested in investing in ESG in the near future, compared to 45 percent of men.
With this data in mind, Vibeka asked whether there is a “missed opportunity for women investors when it comes to ESG investing considering that when women are familiar with it, they are more interested than men.”
Eva agreed that asset managers were missing out on a potential pool of investors by not tailoring their outreach and communications to women’s interests and needs. She also highlighted the different factors that men and women investors consider when making decisions. This includes women placing more focus on rating benchmarks when selecting ESG funds to invest in.
Wrapping up
As Eva noted at the start of the session, Atalanta was founded six years ago to help leverage strategic communications and public affairs to accelerate progress on environmental and social issues.
Later in the discussion, she circled back to this point, noting the critical role that clear, compelling, and jargon-free communications can play in addressing the ESG awareness gap amongst retail investors and helping the sector get back on the front foot after a bruising year.
You can learn more about the report findings and our recommendations for asset managers here.
