Understanding customers’ needs
As part of the Global AXA Group, at Architas, we are driven by the same purpose, values, and vision to act for human progress by protecting what matters. For us ‘what matters’ starts with customers’ needs. As the group multi-manager specialist we are responsible for creating investment offers that align with their financial motivations and priorities.
Taking into account environmental, social and governance (ESG) factors has been a central part of our investment process for some time. We have been a signatory of the UNPRI since 2018 and have fully integrated ESG considerations into our investment process, ensuring that all of our offers meet the high standards we have set ourselves.
To ensure we continue to align our offers and service it’s important that we keep in touch with our end investors. As an industry, we can sometimes be guilty of too often speaking among ourselves. By doing so we risk gravitating towards unconscious biases that exist within our industry. As a result, we commissioned a global investor study to better understand the views of individuals in relation to ESG investing.
The findings in this report are based on the views of 11,000 individuals surveyed across 11 countries in Europe and Asia. The sample collected is nationally representative of age and gender within each country.
In Europe, the survey was conducted in Belgium, France, Germany, Italy, and Spain. In Asia, the survey was conducted in Hong Kong, Japan, the Philippines, Singapore, Thailand, and Indonesia. The survey was conducted online between 28th January and 16th March 2021.
What retail investors want and
where ESG fits in
The basic desire for financial security is what drives retail investor behaviour. However, how investors wish to grow their wealth and reach financial security is changing.
- Financial security is a top motivator for around two-thirds of investors in both Europe (63%) and Asia (66%).
- 43% vs. 56% across Europe and Asia respectively see the development of a retirement fund as a key motivator to invest.
- 88% of non-investors state that ESG factors are potentially important when deciding if and how to invest.
65% of all investors
have said that their primary reason for investing is to ‘feel financially secure’ (vs only 16% to ‘invest for ethical, social and environmental causes’)
Why the language that we use matters
Across financial services, many different terms and phrases attempt to describe products and approaches that do very similar things in the ESG space. But, in the absence of consistent industry standards, this labelling and relabelling, could become a source of confusion. It risks making retail investors less confident in changing their investment behaviours.
- ‘Sustainable investing’ is the most recognised term (by 48% in Europe and 54% in Asia respectively).
- Only one-third recognise the term ‘green investing’ or ‘responsible investing’.
- The term ‘ESG’, commonly used in the financial services industry, is only recognised by one in five (22%) investors in Europe and one-third in Asia (36%).
51% of all investors
have heard of the term ‘sustainable investing’
(vs 30% for ‘ESG’)
that reflect consumer mindsets
ESG investing often carries connotations of green finance projects related to tackling climate change. Yet individuals place great importance on issues across the environmental, social and governance spectrum. Indeed, it is governance factors that are viewed as most important overall.
- Honest and transparent accountancy was ranked the most important/vital ESG factor in 10 of the 11 markets surveyed.
- This was followed by data protection and cyber-security, ranked as the second most important ESG factor in 8 of the 11 markets surveyed.
- Social factors, including supporting healthily lives & wellbeing and supporting access to education, featured in the top five most important ESG factors for some Asia markets. While environmental factors were not so highly ranking.
- In Europe, environmental factors such as avoiding water waste and protecting the oceans and marine life ranked above social factors in terms of importance.
10 out of 11 countries
ranked ‘Honest and transparent accounting’ as the top ESG factor
The ethical grey zone
‘ESG’ does not necessarily mean ‘ethical’. An investment that reflects an investor’s individual ethical standpoint would need to be highly bespoke. The fact that ethics are extremely subjective, and emotive, means ethical perspectives are challenging to codify. It is important for industry actors to consider what investments may or may not be appropriate for an investor based on the individual investors view.
- In all 11 countries we surveyed, over half agreed that their own personal ethical views should be taken into consideration when making an investment.
- Transition firms pose a grey area. Two-fifths of people in European and Asian markets state that an ESG fund should never invest in oil and gas producers.
- Paradoxically though, a majority also feel that oil and gas companies could be included in ESG funds where they are investing in renewable technologies to help transition to a low-carbon future.
67% of all respondents
feel that their personal ethical views should be considered when making an investment
Delivering better consumer outcomes
When considering financial performance, old scepticism among investors with regards to how ESG funds would perform compared to non-ESG funds seems to have disappeared. However, ESG funds have a reputation for being more expensive than non-ESG funds. Fees are an issue that need to be addressed. As does the need for transparency on the nature, objectives and ESG performance of the stock invested in. Our research clearly demonstrates strong appetite for and perceived value in more detailed ESG disclosures.
- Investors, particularly younger investors, are now far more likely to feel that an ESG fund would outperform a non-ESG fund of the same risk level. This is particularly true in Thailand (78%) and Indonesia (64%).
- A majority of investors across both Europe (51%) and Asia (68%) would consider paying more fees in order to invest in ESG funds.
- More than three quarters of all investors feel that it should be mandatory to receive detailed information on how the companies they are invested in perform across ESG criteria.
92% of all investors
would expect the performance of ESG funds to be either superior or comparable to that of non-ESG funds of the same risk level (91% in Europe and 93% in Asia)
What we can do as an industry
Industry must do more translate ESG into a format digestible for retail markets. It must go further to better understand clients’ needs on ESG-related issues and to help educate those clients about how best to reflect those needs within their portfolios.
- A quarter in Europe (26%) and Asia (26%) claimed not to have had a conversation with their adviser about ESG or responsible investment factors in the past. Where conversations are happening, these are almost as likely to be initiated by the client as they are by the adviser.
- A significant portion of investors who do not currently hold an ESG investment (34% in Europe and 46% in Asia) will likely add one in the future.
- Improved transparency is the top call to action to make ESG investing more attractive in both Europe (45%) and Asia (53%). Whilst improvements in product labelling (33% and 39% respectively) are also prominent retail investor demands in both regions.
We need to talk
40% of all investors who don’t currently hold an ESG investment (70% in the Philippines) have said that they would likely add one in the future