A recent poll from Hargreaves Lansdown found that 52% of investors believe that a high return is a more important consideration than sustainable investing. In fact, 21% thought that responsible investing as a concept was nothing more than a fad.
Those approaching retirement were more likely to adopt these views. Nearly two-thirds (64%) of investors aged 45 to 54, and 60% of those aged 55 to 64, prioritise their investment returns over sustainable investing.
Some of the reasons given for not focusing on sustainable investing were that it was too expensive or difficult to do so effectively, and that investors simply don’t have the time to do it.
In fact, one of the biggest reasons is that more than a third (35%) of those aged 55 to 64 believe that sustainable investing generates lower returns, though this isn’t necessarily the case.
Sustainable investing doesn’t automatically result in lower returns
It is a common misconception that sustainable investing automatically results in lower returns. Online investment platform AJ Bell claim that this argument stems from responsible funds excluding industries such as tobacco, which are profitable despite being unethical.
AJ Bell point to the positives, saying that sustainable investments are less likely to fund companies that suffer hits to their share price from scandals or fines.
Instead, they are more likely to fund companies with sustainable business models who are better prepared to tackle long-term challenges, such as climate change.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, emphasises that the myths surrounding sustainable investing prevent it from becoming a more mainstream investment option.
She said: “Despite increased media coverage of issues such as climate change and corporate governance, these kinds of dangerous myths persist around responsible investment.
“As long as people believe they must give up investment returns if they are to invest responsibly it will always remain a niche part of investment, when it could be in the mainstream.”
If you’re thinking of getting started with sustainable investing, have a look at my comprehensive guide to green investment funds in the UK.