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Sustainable Investing Has Hit Tipping Point: Morgan Stanley

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Time and time again, advisors are being told they need to join the sustainable investing revolution or lose out on potential business. A new study by Morgan Stanley backs up that contention.

The report from Morgan Stanley’s Institute for Sustainable Investing found that interest in SI in the general population has grown dramatically. In 2015, 71% of investors it surveyed were interested or very interested in sustainable investing, while in 2019, that number is 85%. As usual with this subject, the millennial numbers are more pointed: in 2017, 84% of millennials were interested and very interested, while today it’s 95%.

But actions speak louder than words. In 2017 42% of the general population and 50% of millennials had sustainable investments. Today, 52% of the general population and 67% of millennials do.

“The implication? You should be seeing more and more of these folks showing up at your office wanting to talk about sustainable investing, so be ready for that,” said Morningstar’s director of sustainability research, Jon Hale, in a recent webinar. “Also, it’s time for you to be asking your clients and prospects about sustainable investing. Don’t require them to bring it up; you bring it up. Chances are they are interested.”

He added that the flows of money into sustainable funds jumped dramatically in 2019 with $13.5 billion year to date, almost triple the inflows of 2018.

Morgan Stanley’s online survey of 800 active individual investors with minimum investable assets of $100,000 had an oversampling of 200 millennials, the firm stated.

While there still is some skepticism on sustainable investments’ performance — 64% agreed there was a trade-off between it and financial returns — 86% agreed that better environmental, social and governance practices can lead to higher company profitability and may denote better long-term investments.

One issue holding some investors back, according to the study, was the perceived lack of product availability, especially for 401(k) plans. That said, today 88% (up from 72% in 2017) of those surveyed stated they would be interested in investing in those products if available.

Popular Causes

The most popular targets of investing were plastic reduction and climate change, according to the study. Those very interested in both came in at 46%, while an additional 37% were interested in plastic reduction and 32% were interested in climate change.

In addition, 84% stated they would like reports detailing the impact of their sustainable investments, although they definitely believe this movement can affect change. In fact, 83% of the general population and 89% of millennials believed their sustainable investments could create economic growth that lifts people out of poverty.

The study also found that consumer behavior has been affected, with 33% of the general population, up from 23% in 2017, and 42% of millennials saying they had purchased a brand particularly because of the company’s environmental and/or social impact. In addition, 33% of the population already screen their investments to avoid getting into something “objectionable.” The number is slightly higher for millennials: 36%.

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