Investors Want ESG, but Advisors Are the Missing Link: Study

While 75% of advisor clients view ESG investing positively, only 30% have discussed it with an advisor, Allianz Life finds.

Impact investing has attracted trillions of dollars, which indicates it is here to stay, states an Allianz Life Insurance Co. survey of 1000 people over age 18. Although millennials get most the credit for this push, with 66% stating they are interested in putting money in environmental, social and governance investments, almost half of Gen Xers and baby boomers state the same.

A missing component, however, is the financial advisor to educate them on these products. The study found only 30% of Americans who are working with financial professionals say they have discussed ESG investing with them. Furthermore, 69% of the time the client initiated the conversation. This was the finding despite 75% of those who work with advisors having a positive perception of ESG investing, stated Allianz.

“Financial professionals have a huge opportunity in front of them to proactively discuss ESG investing with clients,’ said Todd Hedtke, chief investment officer for Allianz Investment Management, in a statement. “It’s important to work with them to identify what issues are important and help them build their portfolio in a way that reflects their values.”

Despite the interest, only 17% of millennials actually participate in ESG investing, compared to 7% of Gen Xers and 3% of baby boomers. However, the survey also found that 64% of millennials said ESG factors are important to their investing decisions, while 54% of Gen Xers and 42% of boomers agreed. The study also found only 15% of people know what ESG stands for.

In addition, the study found, all generations agreed they weren’t sure how to evaluate companies to determine if they followed causes they supported (71% millennials, 64% of Gen Xers, 69% of boomers).

Also, a huge majority across all ages — 77% of millennials, 64% of Gen Xers and 61% of boomers — stated that ESG was a key factor in determining companies with which to do business.

It follows that governance is a key area of investment interest, especially with boomers, 61% of whom say ESG investing encourages companies to be better corporate citizens.

The study also listed some of the top ESG issues people personally care about were:

Some reasons why those surveyed stopped doing business with companies included:

The survey also found there’s a gap between what people say is important and how they invest. For example, although 84% of people said providing “safe working conditions for employees” was important, only 42% said they chose to invest or not invest based on that issue.

Similarly, although 81% of participants said transparent business and finance practices were important to them, only 44% actually chose investments based on that criterion.

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