ESG factors are significant issues for Irish investors
73% of Irish investors say ESG factors influence their investment decisions
Savings and Investment Index up slightly in Q1 2020 thanks to stronger New Year savings sentiment
50% of people were saving regularly in Q1 2020, up from 46% in Q4 2019
Investor sentiment expected to drop in coming months given Coronavirus concerns
It is clear that Environmental, Social and Governance (ESG) factors such as climate change, human rights and good business practices are important ones for Irish investors, according to research for Bank of Ireland’s Savings and Investment Index. 73% of Irish investors said that these factors influenced their investment decisions. Interestingly, the influence of ESG factors was not just confined to millennials – 69% of millennials (16-29) cited ESG factors as important while the corresponding numbers for Gen Xers (30-59) and baby boomers (60+) were 73% and 78% respectively.
The Bank of Ireland Savings and Investment Index, which measures sentiment towards saving and investment, rose slightly from 93 to 94 in Q1 2020. Improved saving sentiment was the main catalyst for the improvement, with the Savings Index rising from 95 in Q4 to 99 this quarter. Investor sentiment was more muted in the first quarter of the year with the Investment Index slipping to 90 from 91 in Q4.
Tom McCabe, Bank of Ireland Investment Markets commented: “In recent years numerous international investor surveys have indicated that ESG factors are becoming central to investors’ decision making. Our research this quarter also shows that Irish investors see these factors as a big influence with 73% of them saying they influence their investment decisions. The response from Irish investors was very clear-cut across all demographics underlining how seriously Irish investors view issues like climate change, human rights and corporate governance.”
The Savings Index rose from 95 to 99 in the first quarter of the year, recovering back to levels last seen during Q2 2019. The improved saving sentiment was squarely down to stronger attitudes to saving in the period. The percentage of people saving regularly rose from 46% to 50% in Q1, a factor that helped push the Saving Attitudes sub index up from 91 to 99, the highest level in around a year. The increased prevalence of regular saving in the first quarter was visible across all age groups – the percentage of under 50s regularly saving rose from 51% to 55% while the corresponding numbers for over 50s rose from 38% to 43%.
Peoples’ short term outlook for savers worsened during the first quarter. The percentage of people that felt that it was a good time to save dropped to 38% in Q1, the weakest reading since Q4 2018, versus 25% who felt it was a bad time to save, unchanged compared to Q4 2019. The greater negativity on the immediate saving environment came primarily from older savers – for example, one in three people aged over 60 felt it was a bad time to save now. Looking out six months people were a little more optimistic about the saving environment with 41% seeing it as a good time to save then. But overall the saving environment sub index slipped from 99 to 98 in the quarter.
According to Tom McCabe, “The increase in the prevalence of regular saving in the first quarter might have been expected as people moved out of Christmas spending mode and into a new year. The fact that 50% of Irish people were regularly saving in the quarter says a lot about the underlying strength of the Irish economy in our view. However based on the first quarter data, the continued low interest rate environment still appears a frustration for savers. Given Eurozone interest rates look set to stay low for the foreseeable future, this may cap any further improvement in saving sentiment for the time being.”
The Investment Index fell slightly in the first quarter, easing from 91 to 90 with a small improvement in the investment outlook off setting slightly weaker attitudes towards investment. The Investment Environment sub index rose marginally from 82 to 83 in Q1 although as in the previous quarter the move was characterised by slightly less negativity around markets rather than any endorsement of the market outlook. At a national level 32% of people felt it was a bad time to invest in Q1 with 23% of people seeing it as a good time to invest.
In terms of attitudes to investment, 36% of Irish people regularly invested in the first quarter of the year – the best reading since Q1. However it was greater dissatisfaction with the amounts which people were investing that dragged the Investment Attitudes Index lower from 100 in Q4 to 97 this quarter. For instance, the percentage of people that felt they weren’t investing as much as they’d like rose to 50% in Q1, the highest reading for the question since Q2 in 2019.
Tom McCabe commented, “Irish investor sentiment was stable in the first quarter prior to the spike in market volatility that accompanied the spread of the coronavirus. However this is very much in the ‘rear view mirror’ now. Looking forward, it is difficult to envisage anything but a drop in investor sentiment over the next few months, particularly given the human and market concerns raised by coronavirus.”
Retirement Optimism Index
Following gains in the past couple of quarters, our Retirement Optimism Index slipped back in Q1 dropping from 112 to 107. The percentage of people that said they had some financial preparation in place for retirement fell from 62% to 58% although this reading was still a strong one in a historical context. Irish people also felt slightly less confident about how they would fare financially in retirement. One in three people felt it would be difficult to live comfortably in retirement from a financial perspective, up slightly compared to