Interest in environmental, social, and governance (ESG)-themed investment products has plateaued over the last two years, even among younger investors, who have been the most enthusiastic about the strategies. However, according to the latest Cerulli Edge—The Americas Asset and Wealth Management Edition, a large advice opportunity for the broader tenets of responsible investing still exists.

Preference for ESG investing fell slightly in 2023, from 48% to 46%, amid increasing political and financial scrutiny. While those under age 40 are still perceived as the most passionate group regarding ESG-related issues, just 66% still prefer ESG-aware investing (down from 72% from the year before), marking a second straight year of declining interest. Meanwhile, households in their 50s remain consistent at 44% support, with 13% expressing strong support.

While enthusiasm for ESG-branded products might have dampened over the last two years, a sizeable opportunity for advice still exists, particularly among Millennials, who are increasingly wealthy and more likely to seek formal financial advice than in previous years.

Cerulli’s research finds that a significant percentage of investors (49%) still prefer not to invest in companies that make products they find objectionable. This includes 42% of self-directed investors, who likely research these companies before making investment decisions. While the desire to eschew objectionable companies is strongest among those with less than $250,000 in investable assets (54%), it is relatively popular across the asset spectrum, with investors who hold $1 million to $2 million in investable assets the least likely (46%) to have this active preference.

Even investors not interested in ESG investing remain concerned with ESG-related issues—overall, 67% of investors say they prefer to invest in companies that pay their workers a fair or living wage. Services such as online advisory screens, which help investors search for funds using ESG screens, including those that promote fair wages, can be a key asset in attracting ESG-friendly investors.

“A sizable population of investors who place value in ESG screens still exists, particularly those centered on environmental and living wage issues, even if they otherwise might not be interested in becoming ESG investors,” says Scott Smith, director. “This creates an opening for both advisors and providers to help interested clients find investments that cater to those values, thereby creating a more tailored portfolio solution while also getting to know their clients as people beyond a simple transactional relationship,” he concludes.