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Rise of Moral Investing as War in Ukraine Rages On

Over half of investors are conscious of how their money is invested in light of Russia’s invasion of Ukraine; new interactive investor poll finds.

Fifty-four per cent of investors have become more conscious of how their money is being invested in the wake of the Russia-Ukraine war, according to a new poll by the UK direct to consumer investment platform interactive investor.

Four in 10 of the sample of 2,058 interactive investor website visitors between 9 and 10 March 2022 said they were considering investments that align with their moral values as a result of Russia’s invasion of Ukraine.

However, almost a third said their moral stance had remained unchanged. Thirteen per cent responded with ‘don’t know’.

The biggest risk to global stock markets

The 42 per cent majority of respondents believe that the potential escalation of the conflict between Russia and Ukraine represents the biggest threat to global stock markets over the next five years. This was ahead of the 23 per cent who cited inflation, and the 20 per cent who cited geopolitical tensions involving China, Brazil and the Middle East.

Meanwhile, just seven per cent cited climate change as their biggest concern, a mere five months on from COP26, the UN climate conference held in Glasgow last year. Only two per cent see the arrival of new waves and/or variants of Covid-19 as a risk to global markets over the same time period.

interactive investor's head of equity strategy Lee Wild 
Lee Wild

“The Russian invasion has had a terrible impact on millions of Ukrainians, and the economic consequences are already being felt around the world. The conflict has made investors think hard about where their money is invested,” comments interactive investor’s head of equity strategy Lee Wild when reflecting on the data.

“More than half of those who responded to our poll are now more conscious about the destination of their cash, and almost 39 per cent are considering investing more in line with their moral values. There are signs that this is not a temporary trend, but a more permanent shift in attitudes.

“The war in Ukraine is acknowledged not solely as a short-term threat to stock markets, but the biggest threat over the next five years by 42 per cent of respondents. How this change in behaviour manifests itself will only become clear over time, but Europe’s shift away from dependence on Russian gas, oil, and coal will be a running theme long after the bullets stop firing.

“With billions of euros earmarked for ‘massive investment’ in solar, wind, and hydrogen, it is logical to assume more money will find a home in the renewables sector. You could even argue that every fund, now, is in some way, a ‘responsible’ or ethical fund,’ even if they would not have classified themselves as such.

“Perhaps funds that have never considered the traditional Environmental Social Governance, or ‘ESG’, credentials are now having to face a new reality where, as agents of investors’ capital, they will have to consider more than just the direct financial impact, and risk, alone. We are all having to take responsibility for how our financial decisions impact the world around us.”

More investors are tweaking their portfolio

More investors appear to be tweaking their portfolio in response to the Russia-Ukraine war.

Fifty-five per cent said they are making changes. Of these, 25 per cent are upping their stock market exposure; 13 per cent are doing the opposite, while 17 per cent are re-allocating money to more defensive sectors.

In comparison, interactive investor’s inflation poll published last month ‘keep calm and do nothing’, reports that ’80 per cent of investors were following the ‘keep calm and do nothing’ mantra’ in response to rising inflation.

Myron Jobson, senior personal finance analyst for interactive investor
Myron Jobson

Myron Jobson, senior personal finance analyst for interactive investor, comments: “As McDonald’s, Coca-Cola, Starbucks, and a number of western companies have halted business in Russia in opposition of the invasion of Ukraine, investors too have pondered where and how their money is being invested.

“For some investors, the ‘keep calm and do nothing’ mantra is simply out of the question as the thought of unwittingly helping to fund the Russian war machine through the investments they hold is abhorrent to them.

“The fact that almost four in 10 respondents of our survey are actively considering investments that align to their moral values shows that many are no longer comfortable with the ‘ignorance is bliss’ approach to investing.

“The Russia-Ukraine war has usurped inflation and geopolitical tensions more broadly as the biggest threat to global markets over the next five years, with concerns over the impact of climate change and Covid taking a backseat – something few would have predicted a couple of months ago.

In past polls, the ‘E’ for environment in ‘ESG’ has been where ethical investors have wanted to focus. But while a sizable seven per cent of our respondents think climate change is the biggest threat to finances on a five-year view, responsible investing from a geopolitical perspective has taken centre stage.

“It goes to show the extent of the dynamism in current affairs, and the knock-on effect on investments. This is why diversification is the name of the game when it comes to investments, reducing potential risks, and increasing potential returns by spreading your investments across different assets.”

Favoured regions among investors

Fifty-eight per cent are funnelling spare cash into UK-centric investments, ahead of US and European offerings; 14 and seven per cent respectively.

Meanwhile, five per cent favour Asia and emerging market investment opportunities, but there is a minuscule one per cent appetite for the frontier market.

Ten per cent said they are investing in other regions.

Author

  • Tyler is a fintech journalist with specific interests in online banking and emerging AI technologies. He began his career writing with a plethora of national and international publications.

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