eToro has announced the introduction of ESG scores for over 2,700 stocks on its platform, a move it describes as enabling its users to consider ESG factors when building their portfolios.
Partnering with ESG Book, a global leader in ESG data and technology, eToro writes that it will provide insights into the world’s largest corporations through a user-friendly traffic light system, with assets labelled as green, amber or red based on their overall ESG rating.
In addition, ‘business involvement flags’ will show if more than 5 per cent 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.
“We believe that knowledge is power when it comes to making investment decisions. Providing ESG scores gives our users access to additional information about a company which is not usually accounted for in traditional financial analysis,” says Gil Shapira, Chief Investment Officer at eToro.
“Although ESG scores should not be relied on as the sole factor for making an investment decision, they can play a valuable role as part of the investment decision-making process. Equally, the scores can also help investors to avoid companies involved in business practices that are not sustainable over the long term or do not align with their individual values or beliefs.”
The launch comes as a recent survey of 10,000 retail investors revealed that three in five (62 per cent) sometimes or always consider ESG factors before investing, with the majority (55 per cent) viewing environmental performance as most important, and fewer prioritising governance (29 per cent) and social (17 per cent). When asked why they assess ESG credentials, one in four (23 per cent) see a direct correlation with financial performance, whilst 22 per cent 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 five (20 per cent) citing this. Slightly fewer (18 per cent) say concerns over greenwashing are a barrier, while 18 per cent worry about the lack of standardisation in ESG scores.
The research revealed a discrepancy in attitudes to ESG amongst different age groups, with the youngest investors (18-34) twice as likely (30 per cent vs 15 per cent) 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 prioritise social (19 per cent vs 13 per cent) and governance (33 per cent vs 26 per cent). The trend is reversed when it comes to environmental, with 61 per cent of over-55s prioritising it versus 48 per cent of 18-34s.
Dr Daniel Klier, CEO at ESG Book, says: “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.”
The firm writes that, 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 firm explains that 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.