September 9, 2013

Wealthy Investors Skeptical of Companies’ Socially Responsible Claims

Spectrem survey finds younger affluent investors more likely to consider social responsibility when investing

Affluent investors tend to be skeptical of companies that proclaim they have a socially responsible strategy, wondering whether this is simply a public relations gimmick.

A new Spectrem Group survey polled investors with net worth between $1 million and $5 million, not including primary residence, and found that 31% considered social responsibility when investing.

Among respondents in that income group who did not consider social responsibility in their investments, 49% said they felt most companies claiming socially responsible corporate behavior did so simply for public relations purposes.

Only 19% of very wealthy respondents with a net worth between $5 million and $25 million, not including primary residence, considered the social responsibility of investments, and were similarly cynical about companies that claimed social responsibility.

Socially responsible investing encompasses an estimated $3 trillion out of $25 trillion in the U.S. investment marketplace, according to the Forum for Sustainable and Responsible Investment.

A separate Spectrem study found that 85% of affluent investors regarded socially responsible investing as investing in environmentally friendly investments or companies, while nearly two-thirds of respondents considered it to be investing in companies that support a specific social cause.

Other respondents focused on the kinds of companies whose products or practices they would not want to encourage.

In the new survey, age made a difference in respondents’ willingness to consider socially responsible behavior of companies in which they invested.

Forty-one percent of investors in the $1 million-to-$5 million group under 45 and 35% of their richer counterparts age 46 and younger considered social responsibility when investing.

The question for these younger investors, then, is how to know when a company is behaving in a socially responsible way.

Spectrem noted in a statement accompanying the survey results that the nonprofit B Lab issues certification for companies — called B corporations — that meet comprehensive and transparent social and environmental performance standards. Certified B corps also must meet legal accountability standards.

Created in 2007, B Lab is funded by private, corporate and governmental entities such as the Rockefeller Foundation, Deloitte, the Prudential Foundation and the U.S. Agency for International Development.

The organizers compare Certified B status to a LEED certification for green buildings, according to the B Lab website.

Some 800 companies across 60 industries in 27 countries have received B corp certifications.

Companies are required to take a survey of their socially responsible practices, and certification can cost between $500 and $25,000 depending on the size of the company.

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