Investors have an appetite for environmental, social and governance investing but financial advisors and employers need to do a better job of educating them about ESG, according to a report by Wells Fargo and the Gallup Panel.
The report found that three-in-four U.S. investors have heard little or nothing about the concept of sustainable investing in part because relatively few indicate hearing about ESG investing from a financial professional, family members or friends, or through the media.
And for 24% of U.S. investors, their largest source of investment knowledge comes from their own research, according to the latest Wells Fargo/Gallup Investor and Retirement Optimism Index survey, which is based on a Gallup Panel web study completed by 1,029 U.S. investors, aged 18 and older in February.
According to the survey results, three-quarters of U.S. investors have heard only a little or nothing about sustainable investing funds, while 25% of investors said they have heard a lot or a fair amount.
Of note, only 12% of investors said they have heard about sustainable investing from a personal financial advisor and 9% from an investment or fund manager. Also, employed investors with a 401(k), just 4% have heard about sustainable investing through their employer’s 401(k) program.
But investors want to know more and when they are given information about sustainable investing, a majority expressed interest in learning more and believe it performs on par with or better than the market average, the report said. Seventy-one percent of investors said they would be very or somewhat likely to purchase stock or funds invested in companies that align with their values.
When presented with the full scope of sustainable investing, 52% of investors noted that they are very or somewhat interested in it, while nearly half are not too (29%) or not at all (18%) interested. On average, investors say they would ideally allocate more than a quarter (26%) of their investment portfolio to sustainable investing.
Additionally, two-thirds of employed investors said they would definitely (28%) or probably (41%) include sustainable funds as part of their 401(k) if they were offered by their employer. What’s more is more than four in 10 employed investors said they would view their employer more positively if they made sustainable investing funds available in their plan’s investment options.
“These findings clearly show that investors are hungry for both information about sustainable investing as well as investment options that reflect their personal preferences,” said Hannah Skeates, global head of Sustainable Investing at Wells Fargo Asset Management. “This should serve as a wake-up call for the industry to do a better job of providing sustainable investing resources and vehicles to investors,” she said in a prepared statement.
As for generations, millennials and Generation X express more interest in aligning their investments with their personal values. Thirty-six percent of millennials and 29% of Gen Xers are more likely than baby boomers/silent generation (13%) to say they would definitely include sustainable investing funds in their 401(k) if offered by their employer.