The ESG disclosures investors really want to see
Exclusions and inclusions top the list, according to AIC survey of private investors.
A list of sectors or types of company that an investment company will not invest in (exclusions) is the most useful ESG disclosure for private investors, according to research1 from the Association of Investment Companies (AIC).
Although investors are not convinced that exclusion is the answer, with 55% of respondents saying it is better to engage with companies than divest2, a list of exclusions still ranked highest among 11 types of ESG disclosure, according to the study of 402 private investors conducted by Research in Finance.
It was closely followed by a list of inclusions, sectors or types of company that an investment company aims to invest in – also known as positive screening.
ESG fund ratings, for example a Morningstar sustainability rating, were regarded as the joint third most useful ESG disclosure by investors, along with measurements of the investment company’s environmental or social impact.
Usefulness of different types of ESG disclosure, according to private investors
|
Rank |
Type of ESG disclosure |
Usefulness on a 1-5 scale (5=very useful; |
|---|---|---|
|
1 |
A list of sectors or types of company that an investment company will not invest in (exclusions) |
4.2 |
|
2 |
A list of sectors or types of company that an investment company aims to invest in (positive screening) |
4.1 |
|
3= |
ESG fund ratings (e.g. Morningstar sustainability rating) |
3.9 |
|
3= |
Measurements of the investment company’s environmental and/or social impact |
3.9 |
|
5 |
A statement of the investment company’s ESG policy/strategy |
3.8 |
|
6= |
Examples of how the manager engages with companies on ESG issues |
3.7 |
|
6= |
Asset manager’s experience/track record in ESG investments |
3.7 |
|
8 |
Carbon footprint of the investment company’s portfolio |
3.5 |
|
9= |
How the investment company is contributing to the UN Sustainable Development Goals (UN SDGs) |
3.4 |
|
9= |
Whether the investment company has signed up to the UN Principles for Responsible Investing (UNPRI) |
3.4 |
|
11 |
Size of ESG team/level of resource |
3.3 |
Source: AIC/Research in Finance. Survey respondents ranked each type of disclosure on a 1-5 scale and the results were averaged.
Respondents’ comments revealed a strong desire for greater consistency among ESG disclosures as well as independent accreditation, to help benchmark funds against each other.
One respondent commented: “For organic products, there is the Soil Association so you know that if you buy a product that has got the association mark, that actually their organic standards are really stringent and you know you have got a good product. With something like ESG investing, would there be an equivalent?”
Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), commented: “Private investors are clearly interested in ESG disclosures, and find several types of disclosure useful. However, there’s a preference for the clear and factual over disclosures that may seem more abstract or subjective.
“We introduced ESG disclosures on our website last year so investors can compare the ESG policies and strategies of investment companies alongside performance data and other essential facts and figures. Since then we have gathered feedback from both private investors and professionals to help us and our members improve the disclosures over time.”
You can read more about the AIC’s ESG research here.
- ENDS -
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Notes to editors
- The online survey of 402 private investors was commissioned by the Association of Investment Companies (AIC) and conducted by Research in Finance. Respondents were mixed by age and gender, investable assets and region but all had at least some money to invest and owned at least one investment product. All respondents self-select some of their investments, though just over a quarter also invest through a financial adviser or wealth manager. The online survey was followed by ten in-depth phone interviews with selected participants to gain further insights. The online survey was conducted from 18 to 28 July 2022.
- In the online survey, 55% of respondents agreed with the statement “I think exclusion isn't the answer and it is always better to engage with companies and try to influence them”, while 33% agreed with the statement “I think there are certain industries/activities that should simply be excluded from funds that have an ESG/sustainable objective”. The remaining 12% agreed with neither statement.
- The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment. Today, the AIC represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s vision is for closed-ended investment companies to be considered by every investor. The AIC has 354 members and the industry has total assets of approximately £262 billion.
- Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance. The value of investment company shares, and the income from them, can fall as well as rise. You may not get back the full amount invested and, in some cases, nothing at all.
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