‘Expert’ SA investors believe sustainable investing most likely to drive long-term returns | Schroders Global Investor Study 2022
Kondi Nkosi, Schroders’ Country Head – South Africa
“Expert” investors are more likely to believe that investing sustainably is key to driving long-term returns compared with people who rate themselves as less knowledgeable, Schroders Global Investor Study 2022 has found.
The sustainability-focused findings of Schroders’ flagship study, which has surveyed more than 23,000 people who invest from 33 locations globally, found that 68% of South Africans who class themselves as having “expert” investment knowledge believe that sustainable investment is the only way to ensure profitability in the long term. This same trend is reflected in the global data, where the same 68% or two-thirds of international investors believed the same.
This compares with 53% of local investors who believe they have ”rudimentary” investment knowledge. Similarly, 74% of “expert/advanced” South African investors share the view that investing sustainably can support positive change when it comes to challenges such as climate change.
Kondi Nkosi, Country Head of Schroders South Africa, says: “It is encouraging to see that the majority (66%) of local investors across all experience levels understand that sustainability underpins profitability, acknowledging the intrinsic link between the two.”
Specifically, the study found that across the world, environmental impact was the main reason people are attracted to sustainable investing. However, investing according to social issues has grown in importance compared with previous years, ranking of second most importance among South African investors.
Interestingly, financial gains only ranked third in global investors’ list of priorities, having declined over the past two years, falling from 42% in 2020 to 36% this year – and compared with only 29% of local investors.
However, a focus on delivering financial returns unsurprisingly remains a priority for many investors. More than half (56%) of global investors seek a fund that focuses primarily on delivering financial returns while integrating sustainability factors. That is particularly the case for people in Asia (61%) and the Americas (60%), while people in Europe were more likely to choose a fund with sustainability characteristics (51%).
For South African investors, it remains of the highest priority, with 71% citing this as their primary consideration.
Investing in line with people’s sustainability preferences
The study also found that people would increasingly invest in sustainable funds if they were able to invest in line with their preferences. More than half of global investors and 70% of local investors across all self-defined expertise levels said that the ability to choose investments that align with their personal sustainability preferences would encourage them to increase their allocation to sustainable investments.
In terms of South African investors’ specific sustainability goals, an end to poverty was viewed as the primary objective among the majority of respondents (27%), while ‘quality education’ ranked as the top priority among investors globally.
This prominence is unsurprising among local investors, with the data revealing that countries with higher poverty levels appeared to prioritise addressing poverty over other factors. In India, for example, eliminating poverty was also listed as the top priority (having been selected by 21% of investors). In contrast, investors in Switzerland selected educational improvements as the priority.
Education and evidence of better performance and impact also key factors to encourage sustainable investment
As well as the ability to choose investments aligned to their personal sustainability preferences, just under half (48%) of global investors and 71% of South African investors highlighted that more education around sustainable investing would encourage them to allocate more sustainably. The lack of clear definitions of sustainable investments was cited as one of the most significant barriers to investing sustainably by all knowledge levels.
Completing the top three, some 44% of people stated that more data and evidence showing that investing sustainably delivers better returns would encourage them to increase their investments.
Concludes Nkosi, “This year’s Study once again revealed environmental concerns to be the primary driver behind the growth in sustainable investment, yet showed that financial returns integrated with sustainability principles remained of top priority among local investors.
“It also highlighted the role of education in increasing sustainable investment. If we can better educate people on the impact that their investments have on the broader environment and society, the more capital we should see flowing into sustainable funds.
“That is why, each quarter, Schroders provides an update on the themes shaping the sustainability landscape, demonstrating our commitment to integrating ESG factors into the firm’s investment processes.”
Schroders’ quarterly Sustainable Investment Reports can all be accessed here.
The full GIS report focused on sustainability is accessible here.
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