UK’s ethical investment market to reach £48bn by 2027
An increased focus on sustainability within the UK's investment community will result in the national socially responsible investing (SRI) market growing by 173% by 2027 to reach £48bn.
That is the key finding of a new survey from sustainable investment firm Triodos Bank, which recently asked 2,020 UK investors about the role that sustainability and ethics would play in their future investment choices.
More than half (55%) of the respondents told Triodos Bank that they would like their money to support companies which contribute to making a more positive society and sustainable environment. Additionally, a fifth said they were planning to invest in an SRI fund before 2027.
The trend towards sustainable investment proved to be particularly pronounced among the millennial and Gen-Z respondents to the survey, with almost half (47%) of investors aged 18-34 saying they intended to invest in an SRI fund within the next nine years. Within this age group, 56% of respondents also said they are motivated to invest in an ethical fund because of climate-related disasters in the news, compared to 30% for older counterparts.
Triodos Bank said in a statement that these age-stratified trends will cause a “tipping point” of accelerated growth in the green investment market from 2023, when it predicts that 18-34-year-old investors will have collectively invested around £300m in SRI funds. By 2027, it predicts that this age group will have made total investments of £1.7bn.
Nonetheless, the company anticipates that over-55s will continue to be the demographic that contributes the most to the UK’s ethical investment market in every year until 2027.
Triodos Bank’s managing director Bevis Watts said the trend toward ethical investment is a result of investors from all age groups realising that every funding commitment has an impact on human, social, economic and environmental issues.
“Demographic changes, social media and awareness of the challenges facing our planet mean that investors are waking up to the fact that there really is no such thing as a neutral investment,” Watts said.
The findings of the survey echo those of a recent report by the Climate Bonds Initiative (CBI), which revealed that the global green bonds market grew by a staggering 78% between 2016 and 2017. During the twelve-month period, national and institutional investors funnelled more than $150bn into low-carbon projects.
The Triodos Bank survey also highlighted concerns about greenwashing among impact investment products, with 45% of respondents revealing that they were worried that some investment funds labelled as SRI would still be investing in companies which have a negative impact on society or the environment.
Watts explained that the ‘mainstreaming’ of green finance could lead to sustainability credentials being watered down by some fund managers, and urged investors to look “beneath the surface” of financial products labelled as “sustainable”.
Similarly, a separate study this week from green start-up development firm Sustainable Ventures found that 31% of investors would like to see more investment opportunities in companies which are “truly sustainable”.
During the study, which surveyed 1,213 UK investors, Sustainable Ventures found that the majority (64%) of ‘sustainable’ or ‘environmental’ funds open to retail investors invest in companies which boast strong Environmental, Social and Governance (ESG) credentials, rather than those which actively reduce negative environmental impacts.
“Investors are increasingly inclined to put a proportion of their capital into sustainable investments, but the definition of what constitutes a sustainable investment differs substantially from product to product,” Sustainable Ventures co-founder Chris Morris said.
“Investing in tech giants, investment banks or soft drinks companies with strong CSR policies is fine, but many investors want to go beyond that and invest in companies that have sustainability at the core of what they do.”