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Feb 10, 2023

How much do retail investors care about ESG ratings?

More than half of retail investors don’t consider companies’ ESG ratings when trading shares, finds new study

Retail investors show little interest in ESG ratings when trading companies’ shares, according to new research. Just one in three retail share traders (35 percent) say they consider how companies fare in ESG-related risks and opportunities before making trading decisions.

More than half (51 percent) say ESG ratings are not something they pay attention to, while nearly 15 percent are not able to tell how much such ratings impact their final decision. 

The survey, published by traded product provider GraniteShares and conducted by Viewsbank, collates responses from more than 1,070 UK-based retail investors. 

When it comes to the importance of ESG for share buying, 45 percent of retail investors surveyed say ESG is important. This compares with 17 percent who say it’s a very important factor. Conversely, 37 percent of respondents say ESG ratings are neither important nor unimportant, and 10 percent consider ESG-related information not at all important. 

How much do retail investors care about ESG ratings?
Will Rhind, GraniteShares

‘It is good that some companies are taking their ESG responsibilities seriously but there is a strong sense from this research that investors feel claims about ESG and the environment are being overstated,’ says Will Rhind, founder and CEO at GraniteShares.

Results highlight increasing concern among retail investors regarding greenwashing. The term refers to companies delivering false or inaccurate information about their environmentally friendly strategies or products in an attempt to capitalize on the growing demand for ESG standards.

The study finds more than 65 percent of retail investors are careful about businesses’ ESG ratings, with 23 percent saying they are very concerned about misleading information being released to lure investors in.

‘Retail investors are very much concerned about greenwashing, and substantial numbers regard ESG as an important topic,’ says Rhind. ‘But most retail investors do not read ESG ratings when trading shares despite the huge focus from financial services companies on providing them.’ 

In relation to greenwashing, the UK’s Financial Conduct Authority (FCA) launched a consultation in October 2022 proposing the introduction of new rules designed to improve trust in sustainable products and protect UK-based funds from greenwashing. 

The proposed rules include three new categories of labels for products considered to be sustainable investments and a set of qualifying criteria underpinning them.  

The consultation concluded in January this year and a publication of the FCA’s final rules is expected to be released in the first half of 2023.