Green thumbed investors on the lookout for greenwashing in investments

• Three fifths (61%) of DIY investors look beyond prioritising investment returns and have some form of environmental focus
• 61% know where to look to find the social or environmental impact of their investments
• Just over half of DIY investors say they can spot greenwashing and 48% rely on environmental certifications, like B Corp status, to inform their investment decisions

ESG and sustainable investing has grown rapidly in recent years and continues to take hold of investor’s interests. Three fifths (61%) of DIY investors, those who actively choose their own investments and make their own asset allocation decisions, have some form of environmental priority when it comes to what they are invested in, according to research from Charles Stanley Direct.

Maximising financial returns is no longer the sole driver as to why people invest. More than a quarter (28%) of DIY investors say that while their priority is to maximise their financial returns, they would prefer to exclude unethical sectors or practices. Similarly, 27% of investors want to maximise their financial return and would also like their investments to consider social and environmental good to bring about positive change to society. 6% say their priority is for their money to have a social or environmental impact.

DIY investors are keeping a close eye on their investments and the impact they have on the environment. Of those who look beyond just what financial returns they may make on their investments, 61% of DIY investors say they know where to look to find out the social or environmental impact of their investments.

Most are active in their commitment to the environment, with 60% saying they have a strong view on what ethical considerations matter to them in their investments.

More than half (53%) of DIY investors say they are confident they can spot greenwashing when it happens, paying more attention than ever on what they are invested in and how investments are positioned by companies themselves.

51% say they spend a lot of time trying to work out the social or environmental impact of their investments, and 48% rely on accreditations (like B Corp) to decide whether an investment has a positive impact, using both personal and professional opinion to inform their decisions.

 
Rob Morgan, Chief Investment Analyst at Charles Stanley Direct, comments: “Being a self-directed investor gives you the opportunity to put your money into what you believe in. Building wealth for the future is important, but increasingly people want their investments to do more than make money, with investors clearly seeking investments that have a greener, more ethical or social impact on society.

“There is an evolution happening where DIY investors are taking more of a stakeholder conscious approach. With so much terminology out there on what green investments are, it’s important investors fully understand the basis on which their investments are placed and used by companies. The launch of a new set of labels for funds overseen by the regulator should help bring much-needed clarity to investors, in addition to reading fund or portfolio literature to help investors put their money where their mouth is. Going forward investors prioritising sustainable investing should be able to make easier comparisons between products and have greater confidence a fund meets their needs.”

Top tips on how to invest responsibly

1. Think about why and how you want to invest. 

Is it for you or a child, and for what purpose is it – retirement or nearer term? This will dictate the type of investment product you use, such as an ISA, Junior ISA or Pension.

2. Consider how much you are going to contribute and how often. 

 
Like any other form of investing, you’ll need to think about whether you can invest as a lump sum, or will you invest in a series of lump sums or monthly contributions.

3. How much risk do you want to take? 

 
This is usually connected to how long you want to invest for and how much you can afford to contribute. Maximising higher risk assets such as shares should be carried out over longer investing periods, while for shorter time periods (e.g. 5-10 years) you should generally use some lower-risk areas, such as bonds.

4. Find out your options available in terms of socially responsible fund options.

 
If you are using an investment platform, you will have plenty of options from different providers. If you are investing via, for instance, a workplace pension then there may be a more limited number available.

5. Weigh up individual investment and fund selections. 

 
Selecting individual shares is an option, though this does take more commitment in terms of research and means it’s harder to get diversification, especially when investing small amounts. For most people, getting instant diversification, as well as the expertise of a specialist fund manager is going to be beneficial. However, it’s important to assess whether the values of that manager meet with your own.

Methodology

 
The research was carried out for Charles Stanley by Censuswide, among a sample of 1007 DIY Investors in the UK (’Self-Directed’), defined as; investors who actively choose their own investments, making their own asset allocation decisions, aged 18+. Survey conducted between 05/07/24 and 10/07/24.