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Royal London Irelands inaugural ESG Sentiment Index reveals:
Sharp lack of confidence in Ireland’s climate change agenda
50:50 split on people’s belief in financial service organisations to deliver on ESG promises
- Less than one in five people believe Ireland has performed well in driving the climate change agenda in 2022
- Men are more pessimistic on the likelihood of financial companies making real progress on sustainability
Ireland has for the most part not risen to the climate change challenge over the last 12 months, and the public are split down the middle in their confidence as to when financial services organisations in this country will make any real progress towards being more socially responsible. These are some of the findings of the first ever Environmental, Social and Governance (ESG – see appendix) Sentiment Index, released by leading life insurance and pensions provider, Royal London Ireland.
The ESG Sentiment Index set out to examine people’s views and hopes around ESG, as well as their confidence in financial services organisations delivering on ESG promises and targets. It found that trust in financial services organisations in this country is subdued, but not absent, when it comes to ESG, though there is a very strong public desire for these companies to act in a socially responsible manner.
The Royal London Ireland Index (see table below) is based on responses to four survey questions rolled out to 1,000 adults nationwide[1].
Commenting on the findings of the inaugural Royal London Ireland ESG Sentiment Index, Joe Charles, Proposition Director at Royal London Ireland, said:
“As the first survey in what we intend to be a bi-annual Index, the starting point is to take a measure of where people are at right now in terms of their hopes and feelings around ESG, and, in particular, the role of the financial services sector in helping to drive positive change in this area.
“The Index itself gives a strong indication of how important ESG is to the general population, with an Index score of 78.5 (where 0 is zero trust and 100 is absolute trust). However, it also reveals some of the lack of optimism and trust that prevails on this issue. Less than one in five people believe that the country, as a whole, has performed well when it comes to climate. With an Index score of just 38 on this issue, the public, in their responses to this survey, appear to be disappointed with the policymaker’s and/or society’s performance on climate targets.
“When it comes to levels of trust the Irish public have in financial services organisations to deliver on ESG promises, the results were mixed. The Index score for this came in at 54.5 which means most people are not fully convinced or happy with their performance.”
The Data Drill-Down
Further highlights from the ESG Index include:
o When asked how important it is that financial service companies act in a responsible manner when it comes to environmental, social, and governance (ESG) issues, the over 55s are more likely to say this is very or extremely important, with 54pc of this age cohort believing this versus 37pc of those in the 35 to 44 age category, or 34pc of those aged between 18 and 24.
o 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 group and genders.
- More than one in three people (31pc) have little or no trust in financial services organisations to deliver on ESG promises.
- Men are more likely to have a very low level of trust, if at all, in financial services companies – 37pc of men held such a view versus 25pc of women.
- Large swathes (almost half) of the youngest generation (18 – 24) have low or no trust in financial services firms to deliver on ESG promises, with 46pc of this age category holding this view versus 28pc of those aged 55 plus or 29pc of those aged between 35 and 44.
o In relation to public optimism that the financial services sector will make real progress towards being more socially responsible:
- Overall, just one in ten are very optimistic.
- 36pc are not optimistic - to varying degrees.
- More men than women are not optimistic – with 43pc of men expressing this sentiment versus 29pc of women.
- The younger age cohorts are the most pessimistic: 53pc of those aged between 18 and 24 are not optimistic to varying degrees; compared to 44pc of those aged between 25 and 34; 29pc of those aged between 35 and 44; 40pc of those aged between 45 and 54; and 28pc of those aged 55 plus.
o When asked about Ireland’s performance as a country in driving the climate change agenda forward in the year 2022:
- The public are somewhat limited in their positive responses to Ireland’s performance on climate change in 2022 – just 16pc think we performed strongly, while most (44pc) thought our performance was “moderate”.
- Four in ten say Ireland’s performance was weak in this regard.
- Men (20pc) were more likely than women (13pc) to say the country performed strongly.
- Half of 25 to 34-year-olds believe that as a country, Ireland has performed weakly over the course of 2022 in driving the climate change agenda forward.
Financial Services and ESG Responsibility
The Royal London Ireland research highlights overwhelming public desire for Financial Services companies to act in an environmentally responsible way, though consumers are less sure about their commitment to doing so.
Mr. Charles contends that it’s up to the industry to change that attitude through meaningful action,
“When considering the E of ESG, the research findings show that the public overwhelmingly believe that Financial Services companies should act in an environmentally responsible way, but are less sure that they actually always do. It’s up to the industry to change that attitude through their actions.
“Issues such as corporate governance (the way a company is run), human rights and climate change are more important than ever, and we believe these and other factors should be taken into account when deciding where to invest our policyholders’ money, on their behalf. As an example of how this can be done, as part of our commitment to being a responsible investor, Royal London Ireland ask our asset managers to ensure that ESG considerations are integrated into our investment choices. This ensures our asset managers consider ESG issues when they making investment decisions, consistently pushing for positive change in the companies we invest in.
“Royal London Asset Management has a long track record in this space, managing sustainable funds since 2003, through varied market, economic and social cycles.
“This allows peoples’ investments, in many cases, do good whilst also helping to provide them personally with a pension income, dignity and comfort in retirement.”
Mr Charles explains that greater education and provision of information is needed 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.
"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 positive action 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] Survey commissioned by Royal London Ireland and conducted by IReach.
| Index Rating | ||
| 1 | Whether financial service companies should act in a responsible manner | 78.5 |
| 2 | Trust in financial service companies promises | 54.5 |
| 3 | Optimism that financial service companies will deliver on their social responsibilities | 50 |
| 4 | How Ireland is performing against its climate change targets | 38 |
Appendix
ESG Explained:
ESG stands for Environmental, Social and Governance, which are three key factors that help investors measure the ethical and sustainability impact of a business or sector.
When looking at the first factor, “E”, for example, an investor would examine what damage a company is doing to the environment. Is it causing pollution? If it’s a chemical company, does it have a history of leaks or spills? And does it clean up after itself? If it’s an oil or gas company, is it extracting as cleanly as possible? And what are its carbon capture plans or energy transition plans? How is it planning to change in future years?
The social element, “S”, involves finding out if a company is looking after people and not exploiting anyone. Does the company care for its employees, its suppliers, customers and the communities that it is involved with? For companies with employees and suppliers in developing countries, where employment law can be less formal, this is particularly important.
Governance, “G”, is about how well companies are run. Do they follow all the legal and accounting requirements? Are they carrying out thorough audits, and do they have all the necessary checks and balances in place? What’s their attitude to company pay and executive bonuses? Do they always put their shareholders’ interests first? Are they as open with shareholders as possible?
An investor who is ESG aware will want to know that these credentials are strong before investing.
Royal London Ireland is committed to acting and investing responsibly. We choose the asset managers that look after our customers’ investments in a responsible way and ask them to consider environmental, social and governance issues in their decision-making. We also aim to act on our customers behalf to influence and challenge the companies they own shares in, on issues such as CO2 emissions, modern slavery policies, and executive pay.
Index – Workings & Methodology
A “Dynamic Factor” or “Diffusion Index” is calculated for each survey variable. The index is the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous period, and below 50 an overall decrease.
About Royal London Ireland
Royal London Ireland has a history of protecting its policyholders and their families in Ireland, and recently launched a new Pensions business in Ireland. Our business heritage in Ireland is nearly 200 years. The Caledonian Insurance Company's first office outside Edinburgh opened on Dame Street, Dublin 2 in 1824.
Today, Royal London Ireland is owned by The Royal London Mutual Insurance Society Limited – the largest mutual life insurance, pensions, and investment company in the UK, and in the top 25 mutuals globally, with assets under management of €178 billion, 8.6 million policies in force, and 4,100 employees. Figures quoted are as at 30 June 2023.
Royal London Ireland’s office is based at 47-49 St Stephen’s Green, Dublin 2.