What motivates investors to include sustainability in their investment choices
Environmental and social challenges are greater than ever, and addressing these challenges will require investment. According to estimates by GFANZ (Glasgow Financial Alliance for Net Zero), achieving a low-carbon energy supply by 2050 will require investments totalling around 125 trillion US dollars. Much of these funds can be raised through private investors. Deloitte and KBC surveyed 1 000 people and came up with insights regarding what motivates investors to include sustainability in their investment choices.
When we think of sustainability, we primarily think of things in our daily lives such as transport, food and housing. We rarely think about our savings, but they can have a big impact.
Nathalie Bally, Responsible Investing Expert at KBC Asset Management
Awareness is the first step towards responsible investing
The importance of sustainability in our daily lives was confirmed by 78% of those surveyed. 62% of respondents already hold responsible investments, although the proportion of these investments in their investment portfolio is sometimes limited. These figures illustrate both the strong awareness of sustainability among a large number of people, and the high potential for further integrating sustainability into investment choices.
‘Our 'Responsible Investing first' approach gives responsible investing a well-deserved place amongst invested assets. We deliberately push responsible investment solutions, both in our digital communications and in face-to-face meetings. As a result, 45% of assets under management at KBC are already invested responsibly,’ says Nathalie Bally, Responsible Investing Expert at KBC Asset Management.
Opening up sustainability for discussion
Regulations such as the MiFID (Markets in Financial Instruments Directive) require financial institutions to ask about the sustainability preferences of their investors and to take this into account in their subsequent advice. This helps investors and the bank broach the topic of sustainability. Moreover, the survey found that contrary to expectations, investors greatly value proactive conversations about responsible investing.
While it is challenging to align customer sustainability preferences with the MiFID framework, it turns out the majority of people value this conversation with their bank.
Nathalie Bally, Responsible Investing Expert at KBC Asset Management
However, people need to know about more than just the regulations: 33% of those surveyed expressed a preference for a face-to-face customer relationship meeting, while 27% prefer to use the website and 22% prefer to use the bank's app. ‘Up-to-date digital communication and ongoing training of advisers in responsible investing are essential. That ensures investors can be offered help whenever they need it in a rapidly changing field, and instils a sense of trust,’ says Bally.
Trust is key if you want to move forward together with your customer, and while the survey respondents often lack information about quality labels, 61% still use them as a guide when selecting products. ‘At KBC, all responsible funds are labelled using Towards Sustainability. This label is audited by an independent body and sets the bar for whether or not funds can be classified as responsible’, explains Bally.
Investors want to see their personal values reflected
Investors want to know about the sustainability performance of their investments. Only 42% of those surveyed say they currently receive enough information on this. It is also clear that more can be done in terms of transparency. Investors want to see clear information about the impact of their investments and also want to be able to assess how far their investments reflect their personal values. The most tangible examples are the performance against the three ESG(1) pillars of responsible investing, and the exclusion of bad practices by companies or in sectors. ‘When screening responsible investment funds, KBC operates a strict exclusion policy. In addition, the fund manager focuses on the three ESG pillars using specific sustainability targets,’ Bally adds.
Financial returns are important for every investor
Financial returns are important, and that also applies to responsible investing. The survey indicates that people's perceptions differ when it comes to the impact of responsible investing on returns. Even within the academic world, there is no consensus regarding the expected financial returns of sustainable investments versus conventional investments. KBC believes that the returns generated by responsible funds need not be inferior to those of conventional investments, especially over the longer term.
Taking control of the future
The aim of the study is to provide inspiration to all stakeholders working towards achieving a sustainable transition. The social, environmental and economic challenges we face today require a carefully considered and appropriate response from the financial sector. ‘As asset managers, we also want to reflect on how we can guide investors even more effectively in their decision on whether or not to invest responsibly,’ Bally concludes.
This study gives us an insight into how investors are engaging with sustainability and which themes they particularly care about. This helps us further shape our approach to sustainability, make the necessary efforts in the right areas and continue our pioneering role.
Nathalie Bally, Responsible Investing Expert at KBC Asset Management
[1] Environmental, Social & Governance
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This article is informational only and should not be considered investment advice.
