With interest in social impact growing and the availability of more responsible investment options than ever before, there is still a significant portion of investors and advisors that are unsure about what it means to implement these strategies in an investment portfolio. And those advisors are missing out on a chance to deepen their client relationships.
According to TIAA Global Asset Management survey results released Tuesday, 46% of advisors say they have never offered responsible investing – also commonly referred to as “socially responsible” or “environmental, social and governance” investing – products to their clients.
The survey also found that 61% of investors say their advisor did not bring up responsible investing over the past 12 months.
“Advisors do know they have to learn more, speak more and start offering more in this space,” Amy O’Brien, managing director and head of responsible investment at TIAA, said during a media briefing in New York.
The survey found that advisors plan to dive deeper into responsible investing, with 58% reporting they’re more likely speak to their clients more about responsible investing and 57% are likely to start offering more responsible investing choices.
Which is a good thing because nearly half (48%) of the investors in the survey are interested in participating in responsible investing over the next 12 months.
And millennials outpace their elders. The survey found that 69% of millennials investors are interested in participating in responsible investments over the next 12 months compared with 43% of other generations.
“The good news is there’s a lot of interest, a lot of future demand for investors but certainly something is preventing them from taking that step,” O’Brien said.
Currently only a third or fewer of affluent investors overall say they currently own responsible investments, the survey found. Two in five affluent investors (40%) report they are unsure if they currently own responsible investments within their portfolios.
The survey suggests that misperceptions about the role and benefits of responsible investing – among both advisors and investors – may be what’s limiting adoption rates.
Notably, the survey finds that 51% of financial advisors believe responsible investing does not provide the same rate of return as other investment strategies, while 57% of investors believe responsible investing offers a lower rate of return. But studies have shown that isn’t always the case.
“According to our recent socially responsible investing performance analysis, indexes that follow SRI guidelines delivered long-term performance returns comparable to the broad market benchmarks,” O’Brien said. “Incorporating environmental, social and governance criteria in individual security selection can in fact deliver market competitive returns.”
Another common belief among investors is that socially responsible investing is only for the very wealthy.