Why private investors are so interested in ESG products

Green and sustainable finance has long been mainstream in the world of institutional investors. Issuers have also recognized that. There is practically no day that goes by without a green, social, or sustainable bond being launched on the market. These are already exceptions when nothing happens in this segment.

Numerous conferences deal with this topic, where it becomes clear how multifaceted the subject is and how far-reaching it will be for the future allocation of portfolios. At these events, mostly experts speak for institutional investors, such as at the event the Sustainable Investment Week of Luxflag, the Luxembourg-based certifier of green and sustainable investments. However, what is the situation for private investors in this respect? How strongly do they perceive the topic, what potential does green and sustainable finance have in this group of retail investors?

Banks, asset managers & Co. derive a great deal of potential from this area of business, as a survey of more than 4,000 private investors in Germany by the auditing and consulting company PwC has now demonstrated. 

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The study was presented at the recently held Sustainable Finance Forum of the Luxembourg branch of PwC

According to the study, more than 80% of private clients said that sustainability is not a fad for them, but a social change. For 47% of those surveyed, the way they deal with sustainability plays a role when they have to decide for or against a financial services provider. Moreover, as many as 59% of customers do not know whether their bank itself is guided by sustainability criteria. 

Most respondents also don’t know much about the concept of sustainability. However, there is no doubt that interest in such products and thus the need for information is increasing. More and more banks and asset managers are following this path, and there is a boom in green and sustainable bond issues.

Even if many investors do not know what to do with this topic, it is not simply dismissed as unimportant and irrelevant for society and also for banking/investment products. According to the study, 52% expect their bank to offer sustainable products. 46% expect their bank to actively inform and advise them about sustainable financial products. 44% expect the bank to display a sustainability seal that shows the customer the positive contribution of the investment.

When it comes to private investors, the situation looks rather bleak: Because just 5% have already used or completed a sustainable investment product at present. In institutional circles it is all too often said that the (profit) potential lies precisely in the transition to a sustainable (financial) world. 

Reading these figures, it is easy to imagine what bankers and asset managers mean by the perspectives they express. In the coming years, there is a considerable business potential in the education about such products, the correct certification, i.e. labeling, and the subsequent sale of such green and sustainable products. The most popular among the 5% of respondents who have already used such products are investment funds, current accounts and stocks. Fixed income can therefore still grow.

Just how great the potential for green and sustainable finance is on the market and thus also in sales to retail investors is also shown by another aspect. Although 51% of those surveyed do not yet own a sustainable financial product, they can certainly envisage signing up for one. Now one would like to know who is so interested in it, and the study also gives an answer to this question regarding the 51% who do not yet have such a product but would buy one: 54% are digital enthusiasts, 67% are digital financial experts, 56% are between 18 and 39 years of age, 65% are voters of the Bündnis90/Die Grünen party, and 58% are (technical) university graduates.

These figures only allow one conclusion to be drawn about the growth of the Green & Sustainable Finance segment: the boom continues and the retail investor is becoming very interested in green funds.

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(Featured image by PublicDomainImages via Pixabay)

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First published in FinanzNachrichten.de, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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