ESG strategies appeal to a broad cross section of investors with especially high interest from those 65 and older, according to ESG Clarity, a survey commissioned by Allianz Global Investors (AllianzGI), one of the world’s leading active investment managers.

It is generally assumed that ESG – referring to Environmental, Social and Governance – appeals the most to millennials because of their desire to have an impact on society. Surprisingly, AllianzGI found that 68% respondents in the 65+ age demographic had a favorable view of ESG investing compared to only 59% of those 25-44. In addition, 65% of seniors called it a sound investment strategy compared to only 54% of those 25-44. Seniors are also incredibly engaged in practicing personal ESG in their daily lives with 81% of those 65+ engaging actively in the issues they care about by staying up to date, deciding which products to buy and contributing their time and money to causes important to them. This compares with only 66% of investors aged 25-44 who practice personal ESG.

What do investors really think?

While the vast majority of investors have never heard of “ESG” by name, 90% of our survey participants claim they care somewhat or a great deal about at least one of these underlying issues: protecting the environment, social responsibility, and fair and transparent corporate governance. What most investors don’t do, however, is follow through when it comes to investing. Only 20% of all investors surveyed practice investment ESG versus 80% who practice personal ESG.

This disconnect between what investors say they care about and believe in, and where they invest, is primarily due to a lack of awareness. Two thirds of investors surveyed were not familiar with ESG as an investment strategy and a mere 2% have ever heard of the letters “ESG” in ESG investing. Further, only 22% make investment choices based on a company’s abilities to adhere to social issues/causes.

Financial advisors are largely missing the ESG opportunity with their clients. Only 14% of investors say their financial advisor has discussed ESG as an investment strategy, and of those that have had a conversation, nearly two-thirds (61%) brought it up themselves.

There are some positive signs, however. 74% wish there was more information available about ESG investing and 65% of investors who discussed ESG with their financial advisors went on to invest in an ESG product. This rises for those 65+ (72%). There may be lack of awareness, but once investors know about ESG they are intrigued.

Kate Thompson, Head of US Retail Distribution at AllianzGI, commenting on ESG Clarity:

“This is a unique way for financial advisors to differentiate themselves. Investors may lack awareness of ESG strategies, but when they are informed, they put their money to work. And, it’s not just the younger generation interested in ESG investing, but investors of all ages. Advisors would be well served in learning about ESG and incorporating it in their practices as a point of differentiation.”

Roadblocks to adopting ESG

Money is flowing into ESG strategies: there was close to $9 billion invested in the US alone by the end of 2016, according to The Forum for Sustainable and Responsible Investment. Although it is growing, it is still small in comparison to the $21.1 trillion invested in US mutual funds, exchange-traded funds (ETFs), and institutional funds reported by the Investment Company Institute. Many of the investors surveyed (42%) are skeptical about ESG investing, believing that they would have to sacrifice their returns if they invested in ESG strategies. And, 90% believe that people like to say they care about ESG issues, but when it comes to investing, they care about returns. The stigma, lack of information and lack of knowledge around ESG investing could be slowing adoption.

Steve Berexa, Global CIO Equities at AllianzGI, commenting on the importance of ESG investing:

“While many retail investors choose ESG products to feel good about the impact of their money on society, few know that many academic studies show that ESG can mitigate risk and does not come at a cost or sacrifice (in terms of returns). We believe that all portfolio managers will eventually integrate the consideration of ESG tail risks into their stock picking and we're moving AllianzGI in this direction.”

The idea that ESG means lower returns is simply not true. In fact, the MSCI KLD 400 (formerly the Domini Social Index / KLD 400) was created to be a diversified equity portfolio, similar to the S&P 500, but incorporating ESG/socially responsible investment screens and avoiding companies scoring poorly in these screens. This is remarkable considering the market environment we’ve experienced in the wake of the financial crisis.

ESG Clarity is an online survey of 1,061 investors conducted by AllianzGI in partnership with GfK, a national polling and market research company, from June 19-30, 2017. Data was weighted and scaled to reflect the known characteristics of US investors age 25+ with $100,000 or more in investable assets who make investment decisions and use financial planners.

Notes to Editors:

To learn more about the survey please visit: https://us.allianzgi.com/en-us/advisors/resources/esg-clarity/what-we-found

The survey was conducted using the web-enabled KnowledgePanel®, a probability-based panel designed to be representative of the US population. Initially, participants are chosen scientifically by a random selection of telephone numbers and residential addresses. Persons in selected households are then invited by telephone or by mail to participate in the web-enabled KnowledgePanel®.

The margin of sampling error is plus or minus 3.3 percentage points at the 95 confidence level, for results based on the entire sample. Margins of error are higher in sub-groups.

About Allianz Global Investors:

Allianz Global Investors is a diversified active investment manager with a strong parent company and a culture of risk management. With 25 offices worldwide, we provide global investment and research capabilities with consultative local delivery. We have more than EUR 500 billion in AUM for individuals, families and institutions worldwide and employ over 650 investment professionals.

At Allianz Global Investors, we follow a two-word philosophy: Understand. Act. It describes how we look at the world and how we behave. We aim to stand out as the investment partner our clients trust by listening closely to understand their challenges, then acting decisively to provide them with solutions that meet their needs.

Data as of 30 June 2017. Includes AUM of entities held for sale.

Disclaimer:

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