The world’s uber wealthy are increasingly putting their money towards socially, ethically and environmentally conscious businesses, which could spur the growth of sustainable investments.
In Capgemini’s World Wealth Report 2020, more than a quarter (27%) of high net worth individuals (HNWIs) those with investible assets of $1 million or more said they were interested in sustainable products.
That figure rose to 40% among ultra high net worth individuals (UHNWIs), those with $30 million or more to invest.
And, importantly, that interest is translating into action. Wealthy investors said they plan to allocate 41% of their portfolio to businesses actively pursuing environmental, social and corporate governance (ESG) policies by the end of the year.
By the end of 2021, that figure is set to rise to 46%.
Their top motivations included higher returns (39%); increased understanding of ESG products (29%); and a desire to give back to society (26%).
Meanwhile their preferred areas of focus were environmental risks and climate change (55%); ethical governance systems (54%); and socially conscious business practices (52%).
As awareness on environmental issues increases the appetite for ESG products has increased.
To be sure, the report which studied more than 2,500 HNWIs across 21 major wealth markets was conducted from January and February 2020, before the fallout of the coronvirus pandemic.
However, Shinichi Tonomura, managing director of Capgemini Financial Services for Asia and Japan, said the increased interest likely spells good news for ESG as higher wealth bands tend to be “slightly ahead” of the curve for emerging investment opportunities.
“As awareness on environmental issues increases and more mature products with better financial returns become available, the appetite for ESG products has increased,” Tonomura told CNBC Make It.
Despite the wider economic downturn this year, sustainable investments have managed to weather the storm reasonably well.
According to the report, investors who implemented ESG equity investment strategies in 2020 beat broader benchmarks.
Meanwhile, Morningstar found 70% of sustainable equity funds recorded returns in the top halves of their broad-based peer group in the first three months of the year.
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