Is responsible investing a factor in financial wellbeing?
What is responsible investing and does it have an impact on financial welling? Saunderson House, a wealth management firm in London, recently conducted a study with high net worth individuals (HNWI) to find out what they’re most concerned about when it comes to their finances.
The study focussed heavily on understanding what motives and concerns them when it comes to managing their wealth and making investments.
With a year of much uncertainty, mixed with a rocky economy and big global changes, have these factors had an impact on these HNWIs, or have their changed the way they think about responsible investments?
What are some of the key concerns?
Among one of the top concerns for many was, understandably, Covid-19. From the results you can clearly see this has overtaken one of the previous top concerns which was Corbyn. The highest of the concerns was a deterioration in general wellbeing – is this as a result of the pandemic and peoples overall wellbeing while working from home?
One particular concern which is new for 2020, is the uncertainty surrounding the Brexit trade deal. With discussions between leaders due to come to head soon, this could be a concern that either improves or continues to rise.
What is responsible investing?
Simply put, a responsible investment is an approach to investment that explicitly acknowledges the relevance to the investor of environmental, social and governance factors, and the long-term health and stability of the market as a whole.
The events of 2020 such as Covid-19, the Australian bushfires and the Black Lives Matter movement, have created an increase in general awareness around social, economic and environmental responsibilities. Among the HNWIs who were part of the research, 49% agreed that they “feel a responsibility to use…wealth in a responsible way, helping to improve the environment and society”. Although some of the events of 2020 have had a negative outcome, have they helped to fuel a new way of thinking where investing is concerned?
Interestingly, 45% of those Saunderson House spoke to said, “the coronavirus pandemic is making me more aware of my social and ethical responsibilities”. Will this shift in mindset continue into 2021 and beyond?
The generational differences
From the research that has been reported, one of the top recommendations has been to have more family conversations around financial wellbeing. Often a difficult conversation between generations, opening the floor to having more discussions about money, wealth and your financial future, could help both younger and older generations understand the stark differences.
The study also found that Millennials claim to have the best level of understanding when it comes to financial wellbeing, while Baby Boomers are also relatively confident that their financial goals are understood by different generations. Perhaps if we opened up the conversation with all of the generations, financial wellbeing would only continue to grow?
Dr. Jehan Perera - Executive Director National Peace Council