Investors across the generations want genuine ESG from firms

Firms presenting themselves as "ESG-friendly funds" won't be enough to convince investors

The recent 2021 United Nations Climate Change Conference, (COP26) has highlighted the need for businesses to commit to battling climate change, including financial services firms.

This year, sixty of Ireland’s largest organisations have made public commitments to setting carbon-reduction targets, making the final roundtable session of the Women in Finance Ireland Series on Environmental, Social, and Corporate Governance (ESG) a hot-button topic.

An explosion of interest in ESG

The discussion featured female leaders from Ireland’s financial services ecosystem and was called “How is ESG affecting the Irish financial ecosystem with sustainable finance products, fuelling economic recovery and societal impact?” During the session, speakers outlined the impact of ESG on the sector, including how it’s changing investor preferences, with investors looking beyond environmental impact.

“There’s been an explosion of focus on ESG for equity investments,” said Elizabeth Geoghegan, Fixed Income Portfolio Manager at Mediolanum Irish Operations.

However, this interest has been recent, she says. In 2015, around one in every 25 equity funds was focused on ESG in terms of launches, yet this year it’s one in every eight funds that have an “ESG gilt or focus.”

In terms of equity flows, she says, it’s even higher at around 30% this year which is up from 15% a few years ago.

Genuine ESG over greenwashing

Suzanne Cashin, Head of Retirement Asset Services at Brewin Dolphin has been in client-facing roles for the majority of her career. She’s seen growth in demand for ESG investing from clients with many drivers.

“In relation to pension funds, they are being more mandated by their members, particularly younger members.” She also says that younger cohorts are “very focused on climate change” and wealth inequality. This group, she adds, also tends to “look at the broader picture of ESG” and go beyond climate to look at the “governance part” which includes how a company is run and serves society.

She said older people are becoming more concerned about leaving a better legacy such as sustainable investments that have a positive impact on the world.

Overall, investors are more knowledgeable about ESG, she says, and aren’t content with investing with an “ESG friendly fund” but want to see the drill-down of where their investments really end up.

Marion Kelly, Chief Executive Officer at Irish Banking Culture Board said that having principles is becoming key for financial services organisations, including knowing what they stand for and what their purpose is, but crucially how the purpose is informing daily decision making, such as the products they are offering, how they treat their staff, and more.

She also said that with investors being more informed about ESG than ever before, firms will find it difficult to get away with “greenwashing.”

To view the roundtable in full, please click here.
Rate This: