ESG Focus: Only 23% Aussie Investors Understand ESG

ESG Focus | Feb 15 2019

A global survey by Legg Mason suggests Aussie investors are among the world's top countries when it comes to adopting ESG principles for investments, but also among the worst with a large percentage indicating they don't understand it.

-More investors globally incorporating ESG into their investment decisions
-Still, a large percentage does not understand the principles of ESG
-Two-third of Millennials are the driving force behind growing ESG acceptance

By Sarah Mills

Only 23% of Australian investors fully understand Environmental, Social and Governance investing, according to an international survey of investor sentiment published by Legg Mason Global Asset Management.

The survey, titled The Rise of the Conviction Investor: Ethics and the search for outperformance driving trends in 2019, found about 46% of Australians said they understood the area a little and 32% said they didn’t understand them at all.

Still, these figures put Australia ahead of most countries, behind the United Kingdom, Germany, France, and Belgium on most metrics, except for the number of those with no understanding. Australian came fourth-last on that ranking.

Legg Mason then polled the investors after showing them a description of ESG, and found 40% strongly agreed fund managers should be actively involved in policing companies they invest in, and 29% said having money in funds that only invest in responsible companies is very important to them.

Overall, 43% of Australian investors said they chose funds based on ESG considerations. Environmental factors were weighted at 30%, and governance at 27%. Social factors only garnered 19% but 45% said a fund manager should consider the treatment of a company’s workforce, the effect on the local environment (45%), enforcement of anti-corruption policies (34%), the effect on global climate change (31%) and should avoid unhealthy or addictive products (32%).

The authors have used the survey to announce the rising influence of Millennials on the financial sector.

It turns out, Millennials have a higher acceptance of risk and take a long-term view, but they are also more concerned about the ethics of the investments they make. Two-thirds (66%) of Millennials say they choose funds or companies to invest in according to Environmental, Social or Governance (ESG) considerations. This compares with less than a third (32%) of Baby Boomers make the same claim.

On other issues, the survey found strong confidence among Australian investors, 68% being quite confident for 2019 – well above the average 58% recorded by investors in other countries.

The majority of Australians also believed Australia represented the best investment opportunity for 2019, followed by the US at 34% and China at 29%.

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