Only 6% of retail investment in Spain is invested in sustainable financial products

In Spain, the number of retail investors that choose sustainable financial products is still extremely low. This is one of the findings of the first edition of the “Report on Retail Investor Behavior in the Sustainable Financial Product Market”, published by the International Chair in Sustainable Finance of the UPF Barcelona School of Management and Triodos Bank, the leading ethical and sustainable banking institution.

The results of the study reveal that just 6% of the people surveyed state that they have invested in sustainable financial products and, of this small minority, 72% only make such investments on an occasional basis. The report conducts an in-depth analysis of the level of knowledge, use and perception of retail banking customers with respect to investment with sustainability and responsibility criteria, as well as its relation to financial institutions.

Marcos Eguiguren, the General Secretary of the UPF-BSM and Director of the UPF-BSM’s International Chair in Sustainable Finance explains that “the growing demand among consumers and investors for responsible products and services, as well as the regulatory pressure to incorporate ESG criteria in investment decisions, have given a real boost to Sustainable Finance. However, one of the most urgent challenges in terms of the future evolution of Sustainable Finance is to improve financial education among retail investors”.

“A lot of education is needed, not only in terms of the new language spoken by the financial world, full of new acronyms and specific terminology, but also on the real effects on the economy in general and on investors’ wallets at an individual level”, adds Eguiguren.

Another key challenge detected in the sector is the lack of standardization in the evaluation and reporting of ESG criteria, which has given rise to debate regarding the use of these concepts as investment criteria.

“Ways to measure these three criteria have not been developed at the same pace. Social and governance criteria are still a real challenge in terms of definition, measurement and standardization, which reduces the level of confidence that ESG factors can be used to manage portfolio risk” explains Carolina Luis-Bassa, the Professor and researcher at the UPF-BSM and author of the report.

Investment with sustainable awareness

According to the report, potential consumers of sustainable financial products place great importance on their social values and the ethical aspects of their actions. Most of these consumers do not only invest in sustainable or responsible products, but rather they have a mixed portfolio in which sustainable investment represents part of a broader strategy to balance risk and return.

In terms of the investor profile, they tend to be people between 35 and 54 years old, with studies related to economics and business administration, and annual earnings of over 25,000 euros.

Within this context, an in-depth analysis of the results obtained in the study reveals that 42% of retail investors put their money into investment funds that promote environmental or social aspects (known as ‘light green’ funds), while just 21% invest in funds with explicit sustainability goals (‘dark green’). Moreover, the report’s findings reveal that 35% of retail investors invest in companies classified as sustainable, while 14% invest in pension plans with sustainable criteria.

With respect to the frequency of investment, 72% of the people surveyed state that they invest in sustainable financial products on an occasional basis, while over half (51%) explain that this type of products accounts for between 6% and 20% of their investment portfolio. In addition, when analyzing the most highly rated attributes of these products, the investors surveyed highlight the security that they product offers, as well as the profitability and transparency of this kind of products, as the aspects that they prioritize in their choice.

During the discussion panel, Susana Cabada, the Director of Personal Banking at Triodos Bank Spain, emphasizes that “Sustainable Finance is not just a fad. It is crucial that portfolios (banks, asset managers, pension funds and insurance institutions) are aligned with the Paris Agreement, which requires a gradual reduction in greenhouse gas emissions. Therefore, we need to promote investment that is truly sustainable and green, as well as improving education so that sustainable finance is no longer seen as complex by retail investors. This will enable us to steadily shift away from “brown “investments”.

This opinion is shared by Joaquín Garralda, the President of Spainsif, who adds that “we have to promote responsible and sustainable finance and investment practices in Spain, with the aim of achieving common goals that boost sustainable developments. The sector has the tools available to do so, but institutions and regulators have to help and support investment managers to adapt better and faster to the changes that this entails”.

With respect to communicating the characteristics and attributes of sustainable financial products, the findings of the study show that the main sources of information used are bank staff and professionals specializing in financial consultancy, which suggests that direct sales is the main channel for commercializing this type of products.