“For all retail investors in our sample (whether they hold ESG investments or not), financial factors (i.e., investment returns, fees, risk and tax matters) are most important when making investment decisions. These financial factors impact investment decisions about twice as much as the governance or social aspects of a potential investment. In aggregate, retail investors indicate environmental aspects are the least important considerations relative to social, governance and financial considerations when making investment decisions,” the study found.
When ESG investors are compared to non-ESG investors, the study found that both groups place the highest importance on financial considerations.
Most retail investors believe ESG investments will perform as well as or better than the market as a whole, Finra said.
“One hypothesis is that retail investors do not hold ESG-focused investments due to concerns about financial performance. This does not appear to be a major barrier to ESG investing; only about a quarter (27%) of investors believe that companies prioritizing their impact on the environment and society will generate lower returns, on average, compared to the rest of the market,” the study said.
Above-average performance expectations for investment returns are most prevalent among investors under age 30 (22%) and among investors with incomes under $30,000 annually (26%), Finra reported.