Royal London Ireland releases 2nd ESG Sentiment Index

Royal London Ireland releases 2nd ESG Sentiment Index revealing:

• More than 50% believe in ‘People Power’ when it comes to tackling climate change.
• Drop in Irish public confidence in financial service organisations and ESG.
• The Index – which tracks trust and optimism in financial services firms - is moving in the “wrong direction”.
• One in ten men don’t believe in climate change; one in four men lay the responsibility for climate change at the door of big business.

More than half the Irish public believe in ‘People Power’ when it comes to protecting our planet, with 51% stating small changes made on an individual level, or in the home, can make a big difference.

But the public’s confidence in financial services organisations in this country has dipped, when it comes to their progress towards being more socially responsible and their commitment to socially responsible behaviour, according to the second bi-annual ESGi Sentiment Index, released by one of the leading life insurance and pensions companies, Royal London Ireland.

The Royal London Ireland ESG Sentiment Index, first launched in early 2023, sets out to examine the changing opinions and outlook of the general public around environmental, social and governance issues, as well the movement in confidence levels in financial services organisations delivering on ESG promises and targets.

The second instalment of the Index research has found that public sentiment towards financial institutions has waned in the last six months.

The Royal London Ireland ESG Index is based on responses to four survey questions (see below) rolled out to 1,000 adults nationwide[1] - the first three of which are repeated (Table 1), while the fourth question changes with each Index instalment (Table 2).i Environmental, Social and Governance (ESG – see appendix).

[1] Survey commissioned by Royal London Ireland and conducted by IReach.

Commenting on the findings and the Index movement over a six-month period, Joe Charles, Proposition Director at Royal London Ireland, said:

“While the Index itself gives a strong indication of how important ESG is to the general population, with an Index score of 76.5 (where 0 is zero importance and 100 is extremely important), by tracking the statistics, we can see a fall in the Index weighting, not only in this area but also in people’s level of trust of financial organisations in this area, and their optimism for future behaviour.

“The financial services industry is broad, encompassing numerous types of organisations - banks, insurance companies, asset managers amongst many others. Negative reports on one organisation or sector within the industry can have a knock-on impact on public perception of the other businesses that operate in the financial services sector – though one often has nothing to do with the other.

“It’s up to the industry to change the pervading discontent by taking actions in support of achieving net zero and through clearer communication around the progress it is making.”

For example, the Royal London Group has committed to[1]:

Achieving Net Zero across its investment portfolios by 2050[2].
Reducing carbon emissions from its investment portfolios by 50% by 2030.
Developing solutions that enable clients and customers to invest in the low carbon transition.
 

Mr. Charles continued: “The variation in people’s perceptions of the impact individual actions can have on tackling climate change is really insightful. One of the most positive takeaways from the results is that over half (51%) of adults in Ireland believe that individuals can make a big difference if everyone takes action. This is really positive – many of the major societal changes have been driven by people power, as we have seen in our own country many times. Though, ultimately Government action will be the most impactful driver in this area.

“On the other hand, however, the Index found that 43% feel individual action is futile without meaningful change from either industry and big business (22%) or Government (21%). In addition, 6pc don’t believe in climate change at all – with one in ten men likely to feel this way – despite all the evidence."

The Data Drill-Down

Further highlights from the Royal London Ireland ESG Sentiment Index include:

When asked how important it is that financial service companies act in a responsible manner when it comes to ESG issues, those over 55 are more likely to say this is extremely important, with 38pc of this age cohort believing this versus 16% of those in the 35 to 44 age category, or 20% of those aged between 18 and 24.

When it comes to trust in Irish financial services companies to deliver on their ESG promises:

Very low numbers displayed a lot of trust in financial services companies to deliver on ESG promises and this trend was apparent across all age groups, with the exception of those in the 18 to 24 category, where 15% said they ‘extremely’ trusted companies in this regard.

o    Almost one in five (20%) of people have little or no trust in financial services organisations to deliver on ESG promises.

o    Men are more likely to have a very low level of trust, if at all, in financial services companies – 37% of men held such a view versus 25% of women.

o    Just over one in three (36%) of the younger generation (18 – 24) have low or no trust in financial services firms to deliver on ESG promises – though encouragingly this is less than the 46pc in this age cohort who felt this way six months ago. The second most likely age group to have little, if any, trust in financial services firms was those aged between 25 and 34 (34%) followed by those aged between 35 and 44 (28%).

In relation to public optimism that the financial services sector will make real progress towards being more socially responsible:

o    Overall, only a small percentage (6%) are very optimistic.

o    33% are not optimistic - to varying degrees.

o    More men than women are not optimistic – with 37% of men expressing this sentiment versus 29% of women.

o    Those aged between 25 and 34 were most pessimistic with 41% of this age cohort not optimistic to varying degrees, followed by 34% of those aged between 45 and 54; 33% of those aged between 35 and 44; 30% of those aged 55 and over, and 27pc of those aged between 18 and 24. This was a marked reversal on last year when the youngest age category (18 to 24) were the most pessimistic.

When asked if individual action can make a real difference in tackling climate change

o    Over half (51%) of adults think, as individuals, they can make a big difference if everyone takes action. More than four in ten (43%) feel individual action is futile without meaningful change from either industry and big business (22%) or Government (21%).

o    One in ten men (10%) don’t believe in climate change. Only 3% of women feel the same way.

o    Far more women think there is huge merit in individual actions and their impact on tackling climate change (57% vs 45% of men).

o    Men are more likely to lay the responsibility for climate change at the door of big business (24% of men versus 20% of women).

o    Those aged between 25 and 34 are more likely, than other age groups, to be disillusioned or underwhelmed at the impact individual change can make on climate change.

Mr. Charles concluded,

“Trust and optimism in financial services organisations in this country is subdued, but not absent, when it comes to ESG. And there is still a very strong public desire for these companies to act in a socially responsible manner.

"Greater education and provision of information is needed from the financial services industry so that the public can be better informed when it comes to choosing product and service providers that reflect more sustainable values.

“The majority of people are still at an early stage of their understanding of ESG issues, and so it’s reasonable that there’s a lot of confusion out there. Over time we believe that ESG considerations will become more and more important for the public when they decide, with their Financial Broker, where to place their pension investment money. Royal London Ireland has a range of ESG Pension funds available to Irish consumers, that allows them to do good for the world, while also aiming to provide them with a dignified and comfortable retirement.

"It’s clear that financial services companies need to improve in this area by demonstrating their commitment and ability to be a force for good through their actions, and then evidencing this by communicating the actions taken and outcomes delivered. It will be interesting to see how the public’s response to the Royal London Ireland ESG index evolves over the coming years.”

Ends

[1] See appendix 2: ‘2022 Activity Highlights’ and ‘Key Areas of Activity for 2023 and Beyond’.
[2] The term Net Zero means achieving a balance between the amount of greenhouse gases emitted into the atmosphere and the amount removed from it. The commitment is based on the expectation that governments and policy makers will deliver on commitments to achieve the  goal of the Paris Agreement. It also assumes this action does not contravene Royal London’s fiduciary duties. The commitment is baselined on the year 2020. It includes assets in funds managed and controlled by Royal London Asset Management, but excludes segregated mandates managed on behalf of external clients, unless otherwise instructed.