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eToro introduces ESG scores as three in five retail investors consider ESG

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eToro introduces ESG scores as three in five retail investors consider ESG

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  • Partnering with ESG Book, the new scoring system will provide ESG insights into the world’s largest corporations through a user-friendly traffic light system
  • Launch comes as research finds 61% of investors consider ESG before buying a stock, with one in four (25%) looking to screen out firms with poor ESG scores
  • Almost half (54%) of retail investors see environmental as the most important element of ESG, followed by governance (33%) and social (12%)

eToro, the social investing network, has announced the introduction of ESG scores for over 2,700 stocks on its platform enabling its users to consider environmental, social, and governance factors when building their portfolios.

Partnering with ESG Book, a global leader in ESG data and technology, eToro will provide insights into the world’s largest corporations through a user-friendly traffic light system, with assets labeled as green, amber or red based on their overall ESG rating.

In addition, ‘business involvement flags’ will show if more than 5% of a company’s revenues are associated with one of 13 different areas that may be considered ethically problematic by some investors, such as investment in adult entertainment, fossil fuels, guns or tobacco.

“eToro believes in the power of the regular retail investor, and we are always tailoring our offerings to serve this growing investor class,” said Lule Demmissie, US CEO of eToro. “ESG scores provide our customers access to information about companies not typically accounted for in traditional financial analysis. Every investor’s decision-making process is different, and ESG scores play a valuable role in putting more knowledge and control in the hands of the customer who wants to factor ESG into their investment thesis.”

See related article: Growing Gap in Support of ESG Voting Between Retail and Institutional Investors, Broadridge Reports

The launch comes as a recent survey of 10,000 retail investors revealed that three in five (61%) sometimes or always consider ESG factors before investing, with almost half (54%) viewing environmental performance as most important, and fewer prioritizing governance (33%) and social (12%). When asked why they assess ESG credentials, roughly one in three (30%) see a direct correlation with financial performance, while 25% look to screen out companies with poor scores.

Retail investors were also asked about the biggest obstacle to adopting an ESG-focused investment strategy. The most common response was that the cost-of-living crisis is forcing them to focus on the most profitable companies regardless of ESG performance, with one in four (24%) citing this. Slightly fewer (22%) say concerns over greenwashing are a barrier, while 20% worry about the lack of standardization in ESG scores.

The research revealed a discrepancy in attitudes to ESG amongst different age groups, with the youngest investors (18-34) much more likely (40% vs 12%) to ‘always’ consider ESG when investing compared to the oldest group (over-55s). Attitudes to ‘E’, ‘S’ or ‘G’ also vary by age, with the youngest cohort more likely than the oldest to prioritize governance (42% vs 30%). When it comes to environmental, 57% of over-55s prioritize it versus 46% of 18-34s.

Dr Daniel Klier, CEO at ESG Book, said: “Retail investors are increasingly looking for greater transparency on the sustainability impacts of their investments, driven by growing awareness that positive ESG performance can improve returns. Our new partnership with eToro will enable more investors to access high-quality ESG scores for better decision-making, helping to align capital to more sustainable outcomes.”

Calculated by ESG Book, the ESG scores combine the most up-to-date market news, NGO signals and company-reported information. Using cutting-edge technology and research, the scores are rebalanced daily to reflect any changes in the sustainability performance of a company, with any update in the score being immediately available on the eToro platform.

Source: eToro

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