Financial advisors are being put under pressure to learn more about responsible investing, and many are stepping up to the challenge, according to Nuveen, the investment management arm of TIAA.
At the same time that advisors are learning more about the category, investors are shifting their emphasis from how they can do good through responsible investing to how the investing can boost their portfolios, according to Nuveen’s Fourth Annual Responsible Investing survey.
Nuveen defines responsible investing as investments that take into account tall types of environmental, social and governance issues, and sustainable and impact investing. The firm acknowledges that the different terms associated with the category can be confusing for both advisors and investors.
The number of advisors who feel comfortable with responsible investing went from 72 percent in 2017 to 83 percent last year. Nuveen said advisors are using responsible investing conversations to solidify their relationships with clients. Advisors also realize they are in a unique position to explain responsible investing’s ability to pursue performance goals and address social factors at the same time, the company said.
Last year, the number of advisors who started conversations about responsible investing with their clients rose to 33 percent, up from 18 percent the year before.
As previous surveys have shown, millennials (93 percent) are more interested in responsible investing than non-millennials (78 percent).
Among high-net-worth investors, “there is greater emphasis on responsible investing’s risk management aspects than on its ability to positively impact a range of social factors,” the survey said.
Nuveen surveyed 1,000 investors with at least $100,000 in investible assets outside of an employer-sponsored retirement account. In addition, it surveyed 315 advisors.
Thirty-four percent of investors said responsible investing can improve their returns and reduce risk, the survey said.
Investors said they feel companies must be proactive in how they preserve the environment, with nine out of 10 saying that companies must actively manage pollution risk. They said an environmental catastrophe can devastate a company’s stock value. Investors also want companies to take steps to address climate-change risk, the survey said.
The survey suggests that “altruistic appeals are not always the only way, or even the right way, to introduce responsible investing to investors,” Nuveen aid,