When it comes to environmental, social and governance focused investments, global investors tend to focus on the environmental component, according to a new study released Monday by Allianz Life Insurance Co. of North America.
The average American investor, however, is equally interested in a company’s social and governance practices when considering an investment, the study found.
Allianz Life conducted an online survey in December with a nationally representative sample of 1,000 respondents ages 18 years or older.
Asked about the importance of several ESG topics in deciding whether to invest in a company, 73% of American respondents cited environmental concerns, such as natural resource conservation or a company’s carbon footprint/impact on climate change.
The same percentage also emphasized social issues like employee working conditions or racial and gender equality, and 69% highlighted such governance topics as transparency of business practices and finances or level of executive compensation as being significant in their decision making.
“While environmental factors are certainly important, the average investor in the U.S. is just as interested in a company’s social and governance practices before they make investment decisions,” Allianz’s chief investment officer, Todd Hedtke, said in a statement.
“From a business perspective, companies need to pay attention to the fact that ESG is not some passing fad. Companies that view this as an opportunity to make changes are likely to realize a positive impact in both the near and long term.”
A similar preference for positive social and governance results was even more pronounced in relation to consumers’ decisions to actually do business with a company.
Thirty-four percent of respondents said a company’s stance on social issues was the most important factor, while 27% said corporate governance issues were a top priority. In contrast, 22% cited a company’s record on environmental issues as their chief concern.
Feelings vs. Investments
Most consumers in the survey agreed that a focus on ESG makes good financial sense when it comes to investments.
Four in 10 said they “love the idea of investing in companies that care about the same issues” they do, and three in four said they believed an ESG investment strategy was “not only one that you can feel good about, but one that makes long-term financial sense.”
Seventy-one percent also said they would stop investing in a company if it behaved in ways they consider unethical.
At the same time, the survey uncovered a significant gap between what respondents said was important and how they actually invested. Following are ESG issues a majority said were important in their decision to invest, compared with the share of investors who said these issues factored into their actual investing decisions:
- Provides safe working conditions for employees — 84% vs. 42%
- Transparent in their business practices and finances — 81% vs. 44%
- Provides living wages to employees — 80% vs. 40%
- Provides quality health insurance to their employees — 78% vs. 42%
- Conserves natural resources — 76% vs. 44%
“Although many people remain skeptical about actual returns from ESG-focused investments and are confused about what qualifies as an ESG investment, investors still see value in supporting businesses with strong ESG practices,” Kelly LaVigne, vice president of consumer insights for Allianz Life, said in the statement.
“As information about the way companies operate becomes more readily available to average investors, we anticipate an even stronger focus on ESG performance. Greater awareness and education on ESG topics will help bridge any existing information gaps on the true importance of ESG.”
Notwithstanding the discrepancy between beliefs and investment actions, investors more often choose to reward companies for good behavior rather than punish them for issues where they do not align, the study found.
Among the 16 different ESG issues highlighted, 11 were more influential in investors’ decision to actively invest, including carbon footprint/impact on climate change, charitable contributions, involvement in reducing poverty and wages provided to employees.
Only two issues were more influential in causing people to stop investing: animal testing and donations to political candidates and PACs.