̽��ֱ�� of Cambridge - investing

Virtual investment experiment indicates informed consumers choose sustainable funds even with reduced returns

Anonymous — Tue, 22 Oct 2019 08:27:08 +0000

Research by the ̽��ֱ�� of Cambridge Institute for Sustainability Leadership (CISL) simulated real-world investment scenarios in order to analyse the extent the investing public values sustainability.

̽��ֱ��‘virtual investment experiment’ offered a unique, science-based rating format developed by CISL to help people understand easily the sustainable performance of funds. ̽��ֱ��study found a strong preference for sustainable investing even with a 2-3 per cent sacrifice in returns.

̽��ֱ��study also found that participants under 35 and inexperienced savers had a stronger preference for sustainable investment; while income, gender and education had no effect on preference. It also showed there was stronger preference for avoiding funds rated poorly for sustainability than for actively choosing funds with high sustainability, indicating avoiding negative environmental and social impacts is more influential in decision-making than the pursuit of positive impacts.

“ ̽��ֱ��study shows that people want more from their capital than only financial returns,” said Dr Jake Reynolds, Executive Director, Sustainable Economy, CISL. “Given the right information, they will avoid investments which harm people or the environment.

“In the real world most savers are not provided with that information; meaning they are unable to make positive choices. Given what we know about climate change, destruction of nature and high levels of inequality, that needs to change.”

‘Walking the talk: Understanding consumer demand for sustainable investing’ is a collaboration between CISL, the Department of Psychology and the Psychometrics Centre, and was commissioned by the Investment Leaders Group (ILG), which is convened by CISL.

̽��ֱ��behaviour of a sample of 2,000 US citizens was analysed to reveal insights into how their decision-making was influenced by the availability of information on the environmental and social performance of funds alongside traditional financial data.

Participants were asked to choose between pairs of funds whose fund factsheets included additional information related to sustainability. In order to simulate real-world behaviours, participants knew they had a chance of receiving a financial investment of $1,000 in the fund of their choice.

̽��ֱ��typical fund factsheets’ additional clear social and environmental impact information was based on a unique rating format called the Investment Impact Framework developed by CISL for the ILG. ̽��ֱ��Framework applies sound science to the measurement and communication of social and environmental fund performance.

“Our findings pave the way for more informed and more effective dialogue between the finance sector and the public about how capital should be invested,” said John Belgrove, Chair of the ILG and Senior Partner at Aon. “This couldn’t come at a more significant or appropriate time - when the world is looking to financial institutions to work towards the systemic change needed to tackle environmental and social sustainability, and climate change.”

Originally published on the CISL website.

A new study has shown that when given clear social and environmental performance data, consumers display an appetite for sustainable investment, even with lower returns.

People want more from their capital than only financial returns

Jake Reynolds

Austin Distel on Unsplash

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Alternative finance market set to double in 2015

sc604 — Fri, 07 Nov 2014 09:10:33 +0000

A total of £1.74 billion will have been raised through alternative finance intermediaries – including crowdfunding, peer-to-peer lending and invoice trading – by the end of 2014, according to new research published today by the ̽��ֱ�� of Cambridge and Nesta, the UK’s innovation foundation.

Alternative finance covers a variety of new financing models which connect people seeking funds directly with funders, often through online platforms. ̽��ֱ��majority of these providers have been founded in the last five years. Regulation of parts of the industry was introduced by the Financial Conduct Authority (FCA) in April this year, and in October the Treasury launched a consultation on a proposal for an ISA for peer-to-peer lending.

In the first three quarters of 2014, alternative finance platforms facilitated loans, investments and donations worth £1.2 billion, with the amount predicted to reach £1.74 billion by the end of the year. ̽��ֱ��researchers predict the amount will reach £4.4 billion in 2015.

̽��ֱ��report shows:

Peer-to-peer business and consumer lending continued to dominate the market with £749 million and £547 million being lent through the models respectively in 2014.
Equity-based crowdfunding reached £84 million, up 201 per cent year on year.
̽��ֱ��alternative finance market has more than doubled in size year on year from £267 million in 2012 and £666 million in 2013, to £1.74 billion in 2014.

By the end of the year it is expected that the UK alternative finance market will have provided more than £1 billion in business finance to over 7,000 small and medium enterprises in the UK, the equivalent to 2.4 per cent of all bank lending to SMEs. In the last quarter, bank lending to small and medium-sized enterprises was down by £400 million, according to the Bank of England’s latest Trends in Lending report.

44 per cent of SMEs surveyed were familiar with at least one type of alternative finance, but just nine per cent had approached an alternative platform for finance.

Over half (58 per cent) of UK consumers surveyed were aware of a type of alternative finance, with more than one in seven (14 per cent) saying they had used an alternative finance platform to seek, lend or donate funds.

“2014 has been a phenomenal year for the industry and this record-breaking growth is set to continue into the next year and beyond,” said Bryan Zhang of the Department of Geography, one of the report’s co-authors. “By connecting people directly and offering more efficient, diverse and transparent ways to invest or raise funds, alternative finance is increasingly becoming a viable source of capital for individuals and businesses alike. Although there are challenges ahead, the future looks very promising for alternative finance.”

Liam Collins, another co-author on the report, said: “These findings shed light on a growing movement that is revolutionising banking, investing and giving by using technology to simplify the links between those who want to invest money and those who need it. With bank lending to SMEs down again this quarter, it’s no wonder that alternative finance is fast becoming an important source of funding for individuals, businesses and organisations who struggle to access finance elsewhere.

“ ̽��ֱ��UK is leading the way globally, and with significant potential for the market to expand it won’t be long before we see alternative finance moving into the mainstream.”

“ ̽��ֱ��UK alternative finance market is burgeoning and we need to develop a more nuanced understanding of its structural drivers, intrinsic characteristics, dynamics and diversity, challenges and opportunities,” said Dr Mia Gray of the Department of Geography. “This report is an important first step to promote empirical research in this increasingly significant area of our economy.”

̽��ֱ��report is the result of a collaboration between Nesta and the ̽��ֱ�� of Cambridge, with support from PwC and ACCA.

̽��ֱ��UK’s alternative finance market – which includes crowdfunding, peer-to-peer lending and invoice trading – is set to reach nearly £2 billion by the end of the year, and is expected to double in 2015, as businesses increasingly seek more efficient ways to raise funding.

By connecting people directly and offering more efficient, diverse and transparent ways to invest or raise funds, alternative finance is increasingly becoming a viable source of capital for individuals and businesses alike

Bryan Zhang

Rocío Lara via flickr

Crowdfunding

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