How are retail investors turning green?

Buying and selling stocks has become easier than ever before thanks to the growth of many online brokers like Robinhood where you can freely trade at any time on your smartphone.

Therefore, retail investing is an increasingly popular phenomenon that the pandemic has further boosted. Today, it accounts for almost 25% of the total US stock market by trading volume, up from 10% in 2019.

The boom of mobile investment apps is taking hold worldwide, facilitating neo-investors who now find it much handier to invest.

But has green trading also become so easily accessible?

ESG trading seems to have been lagging in this in this process of innovation. In fact, it is still hard for “app-traders” to find accurate data on the degree of sustainability of their favorite stocks.

ESG investing has been a sector which featured a rapid growth in recent years. In 2020, The volume of ethical funds traded in the UK has tripled. However, finding data about the carbon impact of investments has been historically difficult for retail investors. Little and vague information is available to the public about how “sustainable” ESG Funds are as there is still no standardized measurement in the sector.

Josh Gregory, who has worked in green finance for over decade and has now founded UK-based Sugi, declared: “This data hasn’t been available to retail investors in the UK at all. Though information has been available to institutional investors looking to shore up their green credentials, it has missed out the DIY investor movement.”

Starting from May, investors in the UK will be able to see how “carbon-free” their stocks are through Sugi, where they can check whether their investments are in line with the Paris Agreement’s goals.

Through platforms such as Vanguard, Hargreaves Lansdown or Nutmeg, the company allows investors to connect their Sugi account to their brokerage account, accessing data from more than 4,400 listed companies, weighted according to the investor’s individual holdings. 

Sugi provides companies’ temperature scores based on analysis and algorithms so that any investor can check how eco-friendly his portfolio is, and see the investments’ performance.

All over the world, FinTechs focusing on ESG are on the rise, such as Swiss-based Yova or FossilFreeFunds.org, meeting the growing demand of eco-friendly investments.

“There is political power behind empowering retail investors rather than approaching institutional investors behind closed doors,” Gregory said. “We want to put the tool in the hands of as many people as possible. Retail is 20 per cent of the UK market so that’s our playground.”
Creating a very visual app seems to be fundamental to ease the everyday brokers to approach ESG finance. For example, Sugi uses red and green colour clouds to show how users’ investments are performing.

Inevitably, mobile brokerage brings in several critics, pressing that this activity has made stock investing “sound like a game” and that “it masks the actual risks”.

Nevertheless, like Gregory, ESG fans and trend supporters believe this is still the best way to lead new and more investors towards more sustainable options.

From Sugi’s survey, it turns out that the average portfolio assessed is in line with a 3-degree temperature increase, which is above the maximum Paris Agreements’ target. No pressure…