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71% of Investors Seek Sustainability: Morgan Stanley

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Sustainable business practices and investment options are becoming increasingly important to investors, according to a survey released Friday by Morgan Stanley.

Seventy-one percent of active individual investors in the study described themselves as interested in sustainable investing, and 65% expected sustainable investing to become more prevalent over the next five years.

Total volume of sustainable investments — speaking in terms of environmental, social and governance practices — nearly doubled from 2012 to 2014, from $3.5 trillion to $6.6 trillion, according to the Forum for Sustainable and Responsible Investment.

However, investors had yet to fully translate corporate advantages into investment action. A majority of respondents in the survey said sustainability and financial returns implied a trade-off for investors.

The Brunswick Insight team conducted the survey on Morgan Stanley’s behalf in mid-November, collecting data from 800 individual investors and from an additional oversample of 200 millennials.

The survey found that millennials and women were at the forefront of sustainable investing and sustainability.

Eighty-four percent of millennials expressed openness to the idea of sustainable investing, compared with 79% of Gen X respondents and 66% of baby boomers.

Millennials were twice as likely to invest in companies or funds that target specific social/environmental outcomes and to divest because of objectionable corporate activity.

Seventy-six percent of surveyed female investors showed interest in sustainable investing, compared with 62% of their male counterparts.

Moreover, 40% of women said they would consider both rate of return and the effect of their investment when making an allocation decision, while only 23% of men said they would do this.

The study said women’s support for sustainable investing, in particular, would have considerable influence on the broader business and investment environments.

It noted that women currently held more than half of all managerial and professional jobs in the U.S. and control 39% of the nation’s total investable assets — $11.2 trillion.

How do individual investors currently factor sustainability into their investment decisions?

The survey found that 72% of investors believed that companies with good environmental, social and governance practices could achieve higher profitability and were better long-term investments.

Respondents said that 46% of their total portfolio, on average, should be invested sustainably.

At the same time, investors were divided in their perception of sustainability and financial gains, with 54% saying there was a trade-off and 46% saying there was not.

“The survey shows that the perception of trade-off between profitable and sustainable investments is still a major barrier to the growth of the field,” Audrey Choi, managing director and chief executive of Morgan Stanley’s Institute for Sustainable Investing said in a statement.

“We and others trying to advance sustainable investing at scale have a job to do, demonstrating that it is possible to achieve positive impact and market-rate returns.”

Why does this matter? “We believe that it is necessary to mobilize private capital at scale to address global challenges,” Choi said.

— Check out SRI on the Rise on ThinkAdvisor.