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Unpacking the E, the S and the G

one month ago

Environmental, Social, and Governance (ESG) factors are the three pillars of sustainable investing. But how are investors prioritising these factors? Our most recent study sheds light on this question, revealing some surprising insights into investor preferences. These findings offer valuable guidance, allowing investment providers to create tailored products that resonate with diverse investor needs.

Governance takes the lead

While environmental and social factors are often perceived as the primary drivers of ESG investing, the study's findings challenge this notion, revealing that governance considerations take precedence for investors globally. This finding, though surprising, is consistent with our previous study conducted in 2021.

With the exception of Germany, where fair pricing and transparent accounting took the top spots, it is transparent accounting and data protection that are the top two factors across all markets. The emphasis on these specific governance factors aligns with the growing significance of corporate scandals, data breaches, and the need for accountability and transparency. As investors become more aware of the impact of poor governance practices, it should perhaps not be surprising that they give greater weight to these factors.

Priorities differ: Europe vs Asia

After governance considerations, European investors place a strong emphasis on environmental factors. Marine life conservation and avoidance of water waste top the list. This underscores the importance for investors in the region of preserving natural resources. Interestingly, cutting pollution and carbon emissions rank lower, which indicates that a broader environmental consciousness here reaches beyond emissions reduction.

In Asian markets, social factors take precedence over environmental factors. Investors in this region prioritise companies’ ethical values, well-being support, and access to quality education. This reflects the growing awareness of social responsibility and the impact of businesses on local communities.

Broad spectrum of importance

Although we see some regional differences for the order in which ESG criteria are ranked, the study's findings reveal a holistic approach to ESG investing among investors. Even the least prioritised factors are still deemed important by a majority of investors. For instance, clean transportation, ranked among the lowest environmental priorities, was still deemed important by 59% of investors in Europe and 69% in Asia.

A company's ethical values also emerged as a leading social concern for investors in both Europe and Asia, reflecting the global trend of aligning investments with personal beliefs and corporate values. This underscores the need for investment products to address a wide range of ESG considerations, catering to the diverse preferences of investors across geographies.

Tailoring investment products to investor preferences

As the sustainable investing landscape evolves, understanding regional nuances in ESG priorities becomes crucial for investment providers. By creating products that address the diverse preferences of investors across geographies, providers can better align their offerings with investors' values and expectations.

ESG factors:
investors’ ranking

Delve deeper into how investors have ranked all 23 ESG factors across different markets.

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Roundel 1

Key takeaways

  1. 1. Governance factors, with transparent accounting and data protection being the top two across most markets, are the leading considerations for investors globally.
  2. 2. Second to governance, European investors prioritise environmental factors like marine life conservation and avoiding water waste, while Asian investors place a stronger emphasis on social factors such as sustainable long-term growth and fair treatment.
  3. 3. Companies' ethical values are a leading social concern for investors in both Europe and Asia, emphasising the importance of aligning investments with personal beliefs and corporate values.

Coming up next

In our next article, we will explore the barriers and challenges that investors face when considering ESG investments, including concerns about performance, fees, and greenwashing. Stay tuned for insights on how the industry can address these obstacles and foster greater transparency and trust in sustainable investing.

Further reading

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