In Focus: Megatrends  

Investors require more disclosure from ESG funds

Investors require more disclosure from ESG funds
Photo: Kampus Production [Pexels]

Investors are in need of additional information when looking to invest in ESG funds, research has found.

According to a study by Boring Money, after collating views from more than 1,500 investors, people need a lot more detail about the fund's environmental, social and governance credentials.

The research expressed how and what would be required in order to 'prove' a fund is indeed sustainable.

Almost half of investors (49 per cent) required a full list of holdings in a fund, as some funds currently release their top 10 holdings.

Some 42 per cent of investors believed a fund’s overarching sustainable objective should also be required, when evaluating the sustainability of the fund in question. 

40 per cent of investors cited “evidence of sustainable impact” to be required as a way of proving a fund’s sustainability. 

Holly Mackay, chief executive of Boring Money, commented: “We note growing appetite and growing scepticism about sustainable investing.

"Investors want a quick, simple ‘food label’ which gives an immediate sense check, before they dig into more detailed reading as follow-up.” 

She added: “Too often, the headline information they seek is buried on some distant page of a long PDF document, which doesn’t map to the realities of how people consume information today." 

Moreover, the research provided some key factors which investors considered when choosing a sustainable fund. The main factor was via independent research agency ratings (41 per cent). 

Some 37 per cent of investors cited carbon emissions as a key measurement of comparison and 33 per cent of respondents said evidence of engagement was key when investing sustainably. 

Myron Jobson, senior personal finance analyst for Interactive Investor, stated: “The current regime of climate related disclosure as well as the availability of data related to broader ESG considerations is not up to scratch.

"But progress is being made. The Treasury recently formed an independent group tasked to crackdown on “greenwashing” in investments and make it easier for investors and consumers to understand how a firm is impacting the environment".

Jobson said for investors wedded to investing in a way that closely aligns with their moral compass, there was "no substitute for doing the legwork themselves.

"This means looking under the bonnet of every product purporting ESG credentials to ensure compatibility", he added.

calum.kapoor@ft.com