Investors’ Interest in ESG Is Far from Uniform
August 17, 2021 — Boston
Providers should seek to understand nuances across the spectrum of wealth and deliver education that speaks to investors’ most pressing concerns
While interest in sustainable investing is increasing, there are marked differences in product preferences among age and wealth cohorts. Product providers must understand these nuances to market their offerings effectively, according to the latest Cerulli Edge—U.S. Retail Investor Edition.
Overall investor interest in pursuing investments with positive environmental or social implications has increased from 43% of affluent investors in 2019 to 49% in 2021. From an age perspective, Cerulli finds an inverse correlation between age and expressed interest in sustainable investing, starting at a high of 75% of respondents under age 40, then dropping off among each progressive age cohort down to only 31% of respondents age 70 and older. From a wealth perspective, sustainability is of greatest interest among those in the lower wealth tiers, with wealthier respondents’ interest stabilizing at close to the 40% level.
“With investors’ environmental, social, and governance (ESG) interest strongest among the youngest and least wealthy investors, product providers face the challenge of generating significant inflows in the short term based on a lack of liquid assets among their most likely adopters,” says Scott Smith, director. “At the same time, however, these investors are least likely to have created strong relationships with financial services providers, leaving the door open for providers that connect with them early in their financial lives, especially around a topic with significant emotional connotations such as sustainable investing,” he adds.
While the majority (53%) of affluent respondents indicate that investing in an environmentally responsible firm is important to them, 65% of respondents favor investments in companies that pay their workers a fair/living wage. “This result highlights one of the biggest challenges in promoting ESG or sustainable investing products,” says Smith. “When presented with these offerings, investors and advisors get hung up on the ‘E’ and rarely consider the ‘S’ or ‘G.’” Particularly notable in these results are indications of interest 16 to 25 percentage points higher among respondents in the three oldest cohorts compared with their overall ESG interest levels.
Although sustainable wages clearly fall into the overall theme of having a positive social impact, it appears not to be a consideration some investors would expect to be an explicit objective of ESG investment processes. With this in mind, Smith suggests that product providers consider how some of the objectives of their ESG portfolios can create emotional connections based on investors’ varying interests and experiences and drive awareness and education of how their offerings meet these needs.
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Note to editors
These findings and more are from The Cerulli Edge—U.S. Retail Investor Edition, 3Q 2021.