American investors fall behind those in the rest of the world when it comes to considering sustainability factors, particularly climate change, according to Schroders, a global asset manager.
In addition, for those investors who do consider sustainability issues, intentions are not being carried out with action, according to the Global Investor Study conducted by Schroders, which has $565.5 billion in assets under management. The study included more than 25,000 people globally and 1,500 people in the United States.
“Sustainable investing is an incredibly confusing area for both investors and advisors,” said Jessica Ground, global head of stewardship at Schroders. Advisors need additional education on sustainability in order to help clients who have an interest in these issues, she added, and “it is on the industry to give advisors more support.”
More than 60% of Americans agree that all investment funds should consider sustainability factors or believe they can contribute to a more sustainable world by choosing sustainable investment products. However, only 15% said they actually invest in sustainably themed investments, and only 31% said they want to invest sustainably.
Americans also are lagging behind in even thinking about sustainable issues when looking at investments. Fifty-one percent of Americans said they always consider sustainability factors when selecting investment products, but the global average is 57%. The vast majority in India (87%), China (80%), Thailand (77%) and Indonesia (76%) said they always consider sustainability when investing.
Investors in Asia may be more aware of environmental and inequality issues because they are the victims of both, said Ground. In the United Kingdom and mainland Europe, pension funds have been pushing for transparency in environmental, social and governance factors, and investors there more aware in sustainable issues.
“We do not want to say there is causation for these issues but there is at least a correlation,” she added.
In the United States, investors cited other factors as higher priorities than investing sustainably. The desire to avoid losing money, meet total return expectations, generate an expected level of income and have reasonable fees were named as more important factors than investing sustainably.
When it comes to sustainable investing, Americans are split on their preferred approach. Forty percent said investing in companies because they are best in class on ESG issues was the best approach, while an equal percent said investing in companies that are likely to be more profitable because they are proactive in preparing for environmental and social changes was the best method.
“There remains a gulf between people’s sustainable investment aspirations and the reality of how they prioritize these factors in their investment decision-making. A significant proportion of investors clearly believe that sustainable investing is important, but this has yet to translate into tangible action for the majority,” Ground said.