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Investors sceptical of industry action on climate change

Investors sceptical of industry action on climate change

More than half of savers (52 per cent) believe the investment industry will not be able to make a difference when it comes to tackling climate change, despite pressure from investors to do so.

Research by The Wisdom Council, published today (February 17), found the investment industry is viewed as one of the least likely to be able to operate sustainably – with only mining, aviation and fossil fuels being perceived worse.

Consumer education might play a part in this as the research also found of the 2,000 consumers questioned 58 per cent were unaware they could invest in a way that would help tackle environmental challenges.

Conversely, it found when consumers were made aware of opportunities to invest their money responsibly, demand was strong. 

Two-thirds of consumers thought that some or all of their pension should be invested using responsible principles, while 45 per cent of investors said they would be willing to engage in a conversation on responsible investment.

Toby Bentley, financial adviser at Lathe&Co, said the investment industry had its work cut out to change these perceptions and should do more to lead the dialogue on climate change either via its own internal policies or through its external investment offerings within that space. 

Bentley said: “There will be too much pressure from regulators and younger investors for them not to do so. 

“As people start to learn more about contentious issues like climate change, specifically within the investment universe, there will be more opportunity for the industry to lead the dialogue on good practice.”

Bentley thinks the industry is still hiding behind terms such as ESG and loose deadlines to avoid making any real changes.

He said: “Why would they put change off? Well, fundamentally change is expensive; for example with many big pension providers having just gone through restructuring or replatforming, they will want a period of stability where they don’t have to hire new task forces, reach out to new fund managers and add new climate change focused funds to their offerings. 

“A lot of the companies within this sector are also massive entities, with layers of compliance and bureaucracy that means making meaningful changes in any area is slow at the best of times.”

He added: “Also, from a demand side, I don’t think there are enough people just yet who are actively searching out investments that challenge the status quo on climate change for the industry to be incentivised to make sweeping changes.”

Tim Morris, independent financial adviser at Russell & Co, said he understood why there was a certain level of cynicism, particularly in the pension space.

Morris said: “This is a massive challenge for pension companies. In the same way as achieving the goal of all electric cars by 2030. 

“An additional 20 years to become carbon neutral sounds a long time. While no one can predict that far in the future, it seems a stretching target. Yet I believe that if you reach for the stars, even if you fall short, you may still land on the moon.”