Interest Rates and Inflation Push ESG to Backseat as a Trading Driver for Remainder of 2022

Today, SIX released the findings of the latest SIX Swiss Exchange Trader Survey, revealing that traders across Europe are more concerned with economic drivers like interest rates and inflation over geopolitical drivers like the conflict in the Ukraine. Also revealing is the fact that traders, when responding to the survey, viewed ESG investing as a lower driver of trading activity for the remainder of 2022, receiving only 7 of a total of 194 votes (see chart).

In general, however, the survey found that half of surveyed traders expect continued stability within the market for the second half of 2022; overall, 93% are neutral or optimistic about the market outlook, compared to 86% at this time last year. The SIX Swiss Exchange Trader Survey was conducted in Q2 2022, with respondents from across Europe (Switzerland, France, Germany, UK&I, the Netherlands and Lichtenstein).

Interestingly, after two years of continued uncertainty, political, social, and economic turmoil, traders are seeing economic factors emerging as stronger than global politics, citing inflation (76%) and increasing interest rates (75%) as the biggest factors driving trading activity as opposed to the Ukraine War (47%) and supply chain challenges (43%). Covid recovery ranked lowest in terms of impact on trading activity, with only 9% of respondents citing it versus 46% last year.

Tony Shaw, Head Sales UK & Ireland, SIX Swiss Exchange, comments: “The results of the survey clearly highlight concerns over the unpredictable nature of global markets heading into H2 2022. Despite the emergence of ESG as a major investment driver in the past few years, interest from traders has now given way to more pressing issues with the prospect of economic downturn on the horizon. It is now more vital than ever that institutions and traders have a trustworthy and well-regulated market operator to provide a stable trading environment in these volatile times.”

Widespread hype around sustainability has not been echoed by the traders surveyed. Only a third of traders take ESG ratings into consideration when making trades, and only 3% of the professional traders surveyed ‘always’ do (see chart). This might be explained by the fact that current Sustainability Reports – which are meant to provide additional information – are only rarely considered helpful when trading ESG stocks.

While it seems that trading may not be mainly driven by ESG oriented strategies, demand for green bonds remains high. In 2021, 43% of issued corporate bonds were issued as ‘green’, and 74% of traders expect this to increase even more over the next two years (see chart).

When asked about rating the significance of underlying aspects within the acronym ESG, over four of five traders perceive Environmental as the dominant factor, followed by Social and Governance.