Financial service providers are underestimating investor appetite for climate friendly investments, warns Hymans Robertson as it launches its latest report, Climate friendly investments: consumer attitudes and insights. The leading pensions and financial services consultancy claims that this could potentially hinder the speed at which providers could achieve their own net zero goals. It also shows if providers give investors better information about how climate risk is linked to investment risk, they will not only remove knowledge barriers, but also create opportunities. Two key outcomes will be increased climate friendly investing from investors and less friction for providers when it comes to decarbonising their default fund.

The report looked at the attitudes of consumers who invest, towards climate-friendly investing. It showed that the majority of consumers feel climate change is an important issue with more than half (55%) saying it’s very important and just under two-fifths (38%) saying it’s somewhat important. Similar numbers of consumers said they would like to start or increase their climate friendly investing but were inhibited by their lack of knowledge at just under half (44%). Followed by a lack of available information at just over two-fifths (41%) and a lack of investment options available at just over a third (34%). Over half of consumers questioned also said that they (54%) would prefer an investment manager or financial adviser that uses their influence to push financial service firms towards more climate-friendly investments, while under a third (30%) would prefer to avoid non-climate friendly investments entirely.

Commenting on the barriers to entry when it comes to climate friendly investing, Kate Fry, Head of Insurance Innovation, at Hymans Robertson, says:

“Our research shows there is work to be done – 73% of those surveyed say they would like more information from their provider. Making sure consumers have access to sufficient levels of information on the opportunities and current limitations of climate friendly investing so they can meet their own personal aspirations should be a priority for providers. As more consumers start to feel empowered through information, they will be in a better position to actively take up any climate friendly investments that providers offer.”

The research also showed a correlation between wealth and the level of importance consumers place on the issue of climate change. More than two thirds (69%) of investors with £100k or more in investments say they consider the issue of climate change when choosing investments, compared to just under half (49%) of those with less.

Commenting on the unrecognised role of consumers in financial service providers own net zero ambitions, Kate Fry, continues:

“There is a massive opportunity for providers of products and services that impact climate change. Our research shows that firms could use consumers’ appetite for climate friendly investing to develop products and services that allow them to take up these options in an active and informed way. It should not be ignored that over three quarters (77%) of those we surveyed said they’re likely to change investment choices in the future towards more climate friendly investments.

“To reach net zero, firms who provide group pension products will have to decarbonise their default funds, it will be important to engage consumers and bring them on this journey.”