Green and Ethical Finance - UK - April 2009

Table of Contents

• Issues in the Market
• Abbreviations
• Future Opportunities
• Raise the profile of green finance
• Compete on traditional selling points to convert potential green targets
• Combat consumer cynicism
• Market in Brief
• The green movement
• A growing market
• Ethical investments suffer setback
• Competitive environment
• Long-term prospects are highly favourable
  • Figure 1: Current market penetration of green and ethical finance products, January 2009
  • Figure 2: Future consideration of green and ethical finance products, January 2009
• Ethical issues considered most important by consumers
  • Figure 3: Top six ethical issues of importance to consumers, January 2009
• Putting ethics into practice
  • Figure 4: Top six green and ethical activities undertaken, by consumers, January 2009
  • Figure 5: Population segmentation, by number of green/ethical activities undertaken, January 2009
• Consumers are starting to take more notice of companies' ethical practices...
• ...but there' s still plenty of scepticism to overcome
• Some companies have more work to do than others
  • Figure 6: Overall ethical trust score of selected financial companies, January 2009
• Market Background
• Key points
• So what is green and ethical finance?
• Still a relatively niche sector
• The green agenda is gaining momentum...
• ...prompting companies to respond and play their part...
• ...although most consumers remain unconvinced of their commitment
• Recent industry initiatives
• Ethical investing
• Approaches to ethical investing
• Varying shades of green
• Ethical banking sector
• Ethical insurance
• Trading Environment
• Key points
• Summary of the main market and macroeconomic developments
• The crunch effect on investor behaviour
• Stockmarket turmoil
  • Figure 7: FTSE 100 and FTSE All Share -- daily index movements, January 2000-January 2009
• Implications for ethical investors
• FTSE4Good
  • Figure 8: FTSE4Good UK Index -- monthly index movements, July 2001-March 2009
• Other indices
• Income and spending growth slows, while the savings ratio collapses
  • Figure 9: Total PDI, consumer expenditure and savings ratio, 2003-12
• Implications
• Strengths and Weaknesses in the Market
• Significant opportunities to expand green finance offerings
  • Figure 10: Green and ethical finance -- summary of strengths, weaknesses, opportunities and threats, 2009
• Market Size and Segmentation
• Key points
• A small but fast-growing market
  • Figure 11: Value of the ethical finance market and other ethical consumerism -- UK, 2003-07
• Ethical finance accounted for over two fifths of ethical consumerism in 2007
  • Figure 12: Total value of ethical consumerism and proportion represented by the finance sector -- UK, 2003-07
• The largest sub-sector is ethical investments
  • Figure 13: Composition of the ethical finance market, by sub-sector, 2007
• Ethical investment sector grew by nearly a quarter in 2007...
  • Figure 14: Value of ethical finance market, by sub-sector, 2003-07
• 2008 performance
• ...but the gain was wiped out in 2008
  • Figure 15: Ethical unit trust and OEIC fund sector, by funds under management and retail sales, 2003-08
• 2009 outlook
• Green mortgages: a very niche sector
  • Figure 16: Value of green mortgage repayments, 2003-07
• Ethical Brands and Products
• Key points
• Ethical investment sector
• Friends Provident
• Others
• Do ethical funds perform just as well?
  • Figure 17: Five-year returns for selected ethical versus non-ethical funds, 2009
• Ethical banking sector
• Co-op Bank
• Ecology Building Society
• Triodos
• Charity Bank
• Green mortgages
• Green insurance
• Green motor insurance
• The Green Car Insurance Company
• MORE THN
• Eco-friendly home and travel insurance
• The Ethical Consumer -- Issues of Importance
• Key points
• About Mintel' s consumer survey
• Online focus group
• Climate change is top concern
  • Figure 18: Ethical issues of concern or importance, January 2009
• Concern for the environment is evenly spread among the age groups...
  • Figure 19: Ethical issues of concern or importance, by age, January 2009
  • Figure 20: Top three issues of concern of importance, by gender and age, January 2009
• ...while excessive company profits are more important to the older age groups
  • Figure 21: Ethical issues of concern or importance, by gender and age, January 2009
• The Ethical Consumer -- Shades of Green
• Key points
• One in 17 people bank with an ethical provider
  • Figure 22: Green/ethical activities undertaken, January 2009
• Women are ' greener' than men
  • Figure 23: Green/ethical activities undertaken, by gender and age, January 2009
• One in four people concerned about animal welfare are Ultra Green
  • Figure 24: Green/ethical activities undertaken, by ethical issues most concerned about, January 2009
• Ethical bank customers like to be insured
  • Figure 25: Financial products owned, by customers of ethical banks versus non-customers, January 2009
• Profile of an ethical banking customer
• Company ethics are often weighed against other key selling points
  • Figure 26: Propensity to buy ethical finance products, January 2009
• Scope to expand the market
  • Figure 27: Green/ethical activities undertaken, by propensity to buy ethical finance products, January 2009
  • Figure 28: Propensity to buy ethical finance products, by number of green and ethical activities undertaken, January 2009
• So what are the main barriers to growth?
• Those who occasionally choose an ethical provider record highest take-up of equities...
  • Figure 29: Financial products owned, by propensity to buy ethical finance products, January 2009
• ...and are very ethically aware
  • Figure 30: Ethical issues of concern or importance, by propensity to buy ethical finance products, January 2009
• How Much do Consumers Trust Financial Brands to be Ethical?
• Key points
• Co-op Bank is the most trusted to behave ethically
  • Figure 31: Degree to which people trust selected financial companies to behave ethically, January 2009
  • Figure 32: Degree to which people trust selected financial companies to behave ethically (illustration), January 2009
• Non-shareholder companies tend to engender greater trust levels
  • Figure 33: Degree to which people trust selected financial companies to behave ethically -- rebased*, January 2009
• Supermarket banks and insurers are least trusted to behave ethically
  • Figure 34: Overall ethical trust score of selected financial companies, January 2009
• Implications
• Attitudes and Approaches toward Ethical Finance
• Key points
• Many people are cynical about the green claims made by finance companies
  • Figure 35: Agreement with attitudinal statements about ethical finance, by gender, January 2009
• Despite the cynicism, finance companies can make a difference
• Men are more sceptical than women
• Young, free and positive
  • Figure 36: Agreement with attitudinal statements about ethical finance, by age, January 2009
• Almost a third of Ultra Greens will pay extra for ethical products
  • Figure 37: Agreement with attitudinal statements about ethical finance, by number of green and ethical activities undertaken, January 2009
• Experience of ethical products improves perception of their value
  • Figure 38: Agreement with attitudinal statements about ethical finance, by propensity to buy ethical financial products, January 2009
• Ownership and Future Consideration of Green Financial Products
• Key points
• Huge market potential
  • Figure 39: Current ownership and future consideration of ethical financial products, January 2009
• Over half would consider choosing ethical finance products in the future
  • Figure 40: Current size of the green and ethical finance market versus its potential size, January 2009
• Co-op Bank' s customer profile is biased towards the over-35s
  • Figure 41: Current ownership of ethical financial products, by gender and age, January 2009
• Highest penetration of ethical finance products among 18-24-year-olds
  • Figure 42: Penetration of green/ethical finance products, by gender and age, January 2009
• One in eight Ultra Greens are customers of Co-op Bank
  • Figure 43: Current ownership of ethical financial products, by number of green and ethical activities undertaken, January 2009
• Scope to convert potential prospects into actual customers
  • Figure 44: Current ownership of ethical financial products, by propensity to buy ethical products, January 2009
• The young are keen to consider ethical products in the future
  • Figure 45: Ethical financial products would consider getting in the future, by gender and age, January 2009
• Future consideration is even greater among those concerned about ethical issues
  • Figure 46: Ethical financial products would consider getting in the future, by ethical issues of concern or importance, January 2009
• Nearly a third of adults expect to consider a firm' s green and ethical credentials when next arranging finance products
  • Figure 47: Likelihood of considering ethical factors when next buying financial products, January 2009
• Again, providers most need to convince younger consumers of their ethical merit
  • Figure 48: Likelihood of considering ethical factors when next buying financial products, by gender and age, January 2009
• Non-shareholder firms set to benefit the most
  • Figure 49: Ethical issues of most concern or importance, by likelihood of considering ethical factors when next buying financial products, January 2009
• Further analysis
• Appendix -- Number of Green Activities Undertaken by Demographics
  • Figure 50: Number of green and ethical activities undertaken, by gender, age, socio-economic group, marital status, presence of children and region, January 2009
  • Figure 51: Number of green and ethical activities undertaken, by working status, household income, daily personal internet usage, daily newspaper readership and main supermarket used, January 2009
• Appendix -- Propensity to Buy Ethical Financial Products by Demographics
  • Figure 52: Propensity to buy ethical financial products, by gender, age, socio-economic group, marital status, presence of children and region, January 2009
  • Figure 53: Propensity to buy ethical financial products, by working status, household income, daily personal internet usage, daily newspaper readership and main supermarket used, January 2009
• Appendix -- Future Buying Intentions by Demographics
  • Figure 54: Likelihood of considering ethical factors when next buying financial products, by gender, age, socio-economic group, marital status, presence of children and region, January 2009
  • Figure 55: Likelihood of considering ethical factors when next buying financial products, by working status, household income, daily personal internet usage, daily newspaper readership and main supermarket used, January 2009