Responsible investing – what retail investor attitudes could mean for advisers

New Scottish Widows research into more than 2,000 UK retail investors and first-time investment considerers suggests that many clients now expect environmental, social and governance considerations to be part of the investment process. They also want clarity, choice and evidence that responsible investing can support long-term financial outcomes.

For advisers, the research points to a clear opportunity: responsible investment can be a constructive route into deeper client conversations about objectives, values, risk, time horizons and expectations of providers. It also highlights the importance of explaining responsible investment in simple, practical terms, avoiding jargon and linking it back to the client’s wider financial plan.

The research found that responsible investing is already influencing retail investor behaviour. Overall, 63% of investors say they consider ESG factors when choosing investments, rising to 83% among 18–34-year-olds. In addition, 78% say they would prioritise responsible investments if performance were comparable, while 74% agree that responsible investing helps build stable long-term returns.

The findings also suggest that many investors assume responsible investment is already embedded to some extent. Around two-thirds say they expect some degree of responsible investment to be built into the funds available to them, and 63% believe it’s the investment provider’s responsibility to ensure responsible investment is upheld. That creates both a reassurance point and a potential advice gap: clients may assume action is being taken, without necessarily understanding what that means in practice.

Responsible investment can be a constructive route into deeper client conversations about objectives, values, risk, time horizons and expectations of providers.”

Younger investors are more likely to support responsible investment, say they understand it, and want information about the responsible investment credentials of funds and companies. Three-quarters of investors under 35 want responsible investing embedded as standard, compared with 39% of those aged 55 and over. Younger investors are also more likely to prefer digital channels, with 65% of under-35s favouring app-based information, compared with 30% of over-55s.

For advisers, this underlines the need to tailor conversations by client segment. Younger clients may expect responsible investment to be discussed proactively and may respond well to concise digital content. Older clients may still be interested but may prefer the discussion to lead with risk management, financial resilience and long-term returns, with responsible investing presented as a means of strengthening financial outcomes rather than a values-led proposition alone.

The cost-of-living crisis ranked as the top issue retail investors are concerned about, with worries about climate change, energy security, UK job creation and water pollution also featuring. This reinforces the view that responsible investment conversations should not be framed as separate from financial priorities. Clients may care about environmental and social issues, and still remain focused on affordability, resilience and practical outcomes.

An adviser-led discussion can help connect these concerns to portfolio construction. For example, climate risk, energy security, labour standards and water scarcity can all be discussed as financially material issues that may affect companies, sectors and long-term investment outcomes. This can help move the conversation away from a binary ‘ethical or not ethical’ framing and towards a more rounded discussion of risk, opportunity and client preferences.

The research shows strong support for responsible investment being built into investment propositions, but not necessarily at the expense of client choice. Seventy per cent of investors say they would prefer providers to offer default or ready-made funds based on responsible investment principles, while 62% say they would like the option to choose specific environmental or social themes themselves.

There’s also demand for clearer labelling and simpler explanations. Sixty-nine per cent of investors say they would be more inclined to invest responsibly if investments were clearly labelled, and more than 40% say they lack sufficient information to properly evaluate responsibly invested funds. For advisers, this creates an important role in interpreting product language, explaining the difference between ESG integration, stewardship, exclusions and thematic approaches, and helping clients understand what is – and is not – being offered.

Advisers can add value by turning broad interest into informed decisions.”

One of the most adviser-relevant findings is that 61% of respondents who currently make their own financial decisions say they would consider using an independent financial adviser in future. That suggests responsible investment could be a route to engaging self-directed investors who are interested but uncertain, particularly where they need help balancing values, performance expectations and risk appetite.

Advisers can add value by turning broad interest into informed decisions. That may include establishing whether a client wants responsible investment to be embedded across the portfolio, wants to express specific preferences, or simply wants reassurance that material ESG risks are being considered. It also means managing expectations. Responsible investment is about building resilience: understanding the issues that could harm investments over time, while positioning for the opportunities that can create value.

The research suggests that responsible investing is becoming an expected part of the retail investment landscape, particularly among younger investors. But expectations are not always matched by understanding. For advisers, that creates a valuable advice opportunity: to help clients make informed choices, understand how responsible investment is applied, and connect their preferences to a robust, long-term financial plan.

• Start with objectives: “How important is it that your investments take account of environmental, social or governance risks alongside financial considerations?”
• Clarify expectations: “Do you expect responsible investment to be built in as standard, or would you prefer to make specific fund selections?”
• Explore priorities: “Are there particular issues – such as climate change, energy security, job creation, water or human rights – that you would like us to consider?”
• Check communication preferences: “Would you find short summaries, fund factsheets, app updates or more detailed reports most useful?”

You can read our research in more detail by visiting this link. You can also visit our Responsible Investment pages here.