Aviva survey reveals Covid-19 has sparked interest in ESG

One of the unexpected side-effects of the Covid-19 crisis has been an increased interest in ESG.

ESG – Environmental, Social and Governance – is a well known term amongst advisers, but it’s still relatively new to clients. Other terms that might be used include ethical, sustainable, responsible, green and Corporate Social Responsibility (CSR), among others.

The survey of over 500 people with investments found that over half (55%) said that the pandemic had had an impact on their likelihood to take ESG factors into consideration when deciding where to invest their money. Amongst those who said they already consider ESG, 81%  said the pandemic made this even more important.

This new awareness of the importance of ESG has been borne out by customers’ investing behaviour on Aviva’s Direct platform.  The value of new investments in ESG funds in the six months since March has more than doubled compared with the preceding six month period.  Investing in other types of funds, meanwhile, has remained steady.

The research  also indicates that the ESG market is still very young. Of those who already consider these factors, only a third (32%) have been doing this for over a year. By contrast, nearly half (49%) have only started within the last 6 months – coinciding almost perfectly with the shock of lockdown in March.

The survey found that it is still the more traditional environmental factors that drive investors to seek these types of investments – the ‘E’ factor – namely, those that relate to pollution (67% say this is an important factor) and climate change (58%), waste and recycling (64%) and promoting animal welfare (58%). However, those that have considered ESG for longer are more likely to be motivated, in addition,  by pursuing the positive and feel they are making a difference by carefully choosing  where they invest their money, rather than simply avoiding companies that do the ‘wrong thing’. There seems to be a journey emerging through ‘E’, then ‘S’ then ‘G’, as investors learn more about these investments, and what it is possible to influence through their own actions.

Alistair McQueen, Head of Savings and Retirement at Aviva, said, “Lockdown may have stopped many things, but what it appears to have kick-started is an interest in using money as a force for good. ESG is growing, fast. Aviva’s research suggests that many investors are just at the beginning of this exciting journey. Education and information will be key. At Aviva, we’ve acted on this insight to enhance our ESG offering, on our website and our investment platforms. “

New money only

Further research, amongst 1000 investors with company or private pensions has also revealed  that even those who have taken ESG into consideration when investing in other products very rarely retrospectively change their pension funds to align with their values.

Overall, 60% of people with private pensions had not taken any action to change where their money is invested since set up, whether to maximise returns, choose funds that reflect their personal beliefs more closely, or invest in companies with good ESG records. The results amongst those who say they always consider ESG factors are also surprisingly low, with less than half (40%) saying they have changed to funds which better reflect their personal beliefs.

This represents a huge amount of ongoing investment that is not being considered through an ESG lens, even where investors clearly have an interest in these considerations with other financial products. 

Alistair McQueen said, “For the first time, 2019 saw a majority of people of working age investing in a pension[1]. Investing is now a majority sport. But our insight suggests that many people have yet to make the connection between their pension and its investing potential. Most people report that they are not choosing to revise their investment options after day one, despite this being a common offering across many pensions. There is a huge potential to engage millions of savers by educating them on the potential of ESG and by informing them on how they can manage their investments throughout the life of their pension.”

[1] https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/pensionwealthingreatbritain/april2016tomarch2018