Australian investors prioritising returns over ethics: Data

Ethical investing has lost significant ground among Australia's self-directed investors with new data from Sharesight pointing to a sharp decline in ESG-focused holdings since 2021.

Analysis of the platform's top 250 most traded investments show ESG labelled funds fell by 60- 70% between December 2021 and December 2025. Over the same period, the average ESG risk score of these holdings increased from 21.2 to 24.8, signalling a deterioration in overall sustainability profiles. The implied MSCI ESG rating also dropped by a full letter grade, shifting from A/AA to BBB/A. reflecting weaker perceived ethical standards in investor portfolios.

At the peak of ESG investing, products such as the Betashares Global Sustainability Leaders ETF and similar offerings from Vanguard were among the most actively traded. However, by 2025, many of these funds had fallen sharply in rankings or disappeared from the top traded list altogether, Sharesight said.

The shift has coincided with increased exposure to higher growth and higher risk assets, including US technology stocks and cryptocurrencies such as Bitcoin and Ethereum, and sectors like uranium, nuclear energy and defence.

Sharesight chief executive Douglas Morris said the data highlights a growing disconnect between investors stated values and their actual investment behaviour.

"Ethical ETFs were a meaningful part of retail portfolios just a few years ago. They've now been overtaken by tech, crypto and energy exposures. What the data reflects is less about ideology shifting and more about where investors believe the strongest returns will come from, and right now, that's not ESG," he said.

The trend appears consistent across demographic groups, indicating a broad-base move rather than one driven by age or gender.

"The gap between what investors say they value and what they actually hold has always existed. Our data gives us a rare, objective window into that gap - and right now, it's widening," Morris said.

The findings are based on anonymised data from more than 350,000 global portfolios on the Sharesight platform, with a focus on Australian trading activity through to April 2026.