Pragmatic Investors Prioritise Responsibility

Netwealth research conducted in late 2021 during one of the largest rallies in Australian equities revealed that 56 per cent of Australians were either doubtful or sceptical about responsible investing.

In late 2022, the ASX-listed platform provider conducted another survey of investors, which was conducted during a year that was very different from 2021 for equities. It is difficult to determine whether performance affected the ethical, social, and governance (ESG) priorities of Australian investors. However, one thing is certain: the figures do not lie.

A greater number of Australians were optimistic about the returns on responsible investing. According to the data, 27% of respondents believed that returns on responsible investing were better than those on traditional investments, compared to 21% in 2021.

The data showed that younger generations of Australians were more inclined towards responsible investing compared to older generations. The largest cohort was Gen Y, with 38% of respondents identifying as such (up from 28% in 2021), followed by Gen Z at 37% (up from 29% in 2021) and Gen X at 28% (up from 20% in 2021).

The data also revealed that men increased their responsible investments more than women, with 38% of men investing responsibly in 2022 (up from 25% in 2021). In contrast, only 24% of women invested responsibly in 2022 (up from 19% in 2021).

Although responsible investing has increased across the board, those who were previously undecided tended to become more resolute in their stance towards ESG. The percentage of those who would never consider investing in socially responsible investments increased from 26% to 34%.

The survey divided respondents into four responsible investing segments: believers, pragmatists, doubters, and sceptics. The largest cohort were doubters (28%, down from 36%), followed by believers (27%, unchanged since 2021), sceptics (23%, up from 20%), and pragmatists (23%, up from 17%).

Pragmatists were the group that grew the most over the year. These individuals were likely already invested in socially responsible assets but did so out of pragmatism, seeing it as a way to diversify their investments and potentially generate high returns. While their attitudes towards responsible investing were neutral, they had a high level of understanding of this type of investing.

Convenience was found to be an increasingly significant consideration in the 2022 data, with 39% of Australians stating that they would only invest in socially responsible investments if it was convenient (up from 28%). This shift was particularly notable among Gen Z, with 48% stating that convenience was a key factor (up from 35%).

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Source: Money Management