One in three U.S. investors in a survey released Monday by Newton Investment Management said they wanted their fund managers to actively engage with management of companies with sustainability issues rather than invest just in sustainable ones.
This preference showed up a stark difference between generations, with 43% of millennials wanting engagement versus only 19% of investors older than 50.
“We believe that ESG is not a label, it’s finance 101,” Andrew Parry, head of sustainable investment at Newton Investment Management, said in a statement.
“That is, environmental, social and governance insights are not add-ons, but part of the mosaic of inputs that influence good investing decisions. That’s a message that’s resonating more and more with investors, and one we believe the study findings help to underscore.”
Oxford Risk designed and conducted an online survey on the firm’s behalf in September and then analyzed responses from 1,000 individuals investors in the U.S. and 1,000 in Canada, 18 and older, with household investable assets ranging from $40,000 to $4 million.
Newton Investment Management is a subsidiary of BNY Mellon Investment Management.
When it comes to ESG, the study’s findings ran counter to where the bulk of the asset management industry’s focus has historically been, on governance.
Thirty-nine percent of U.S. investors expressed most concern about environmental issues, followed by 28% who expressed concern about social issues.
Twenty-three percent of American respondents cited governance concerns.
“While today’s individual investors are most concerned with environmental issues, it is in the area of corporate governance — in the form of active engagement with leadership at companies and informed proxy voting power — where the asset management industry might exert its largest and most immediate positive influence,” Parry said.
The generational gap showed up in investors’ awareness of and interest in the social investment space, with attendant effects on retirement planning.
Eighty-six percent of U.S. survey participants who were 39 and younger said they were interested in sustainable investing, compared with 70% of those older than 50.
Asked whether they used a sustainable investing option in their retirement pension, 36% of respondents reported that their plans did not have such an option, and 44% said they did not know whether they had a sustainable option in their pension.
The survey found that even in the “forced-choice” environment of self-invested corporate or personal pensions, where investors have to do at least some browsing, only 20% were aware that they had a sustainable investing option.
Of those investors who recognized that they had such an option, however, 53% chose to use it — but with upward of five times more millennials in that group than baby boomers choosing to do so.
“The study data is profound in terms of what it suggests about the future of investing and how companies might better align themselves with the concerns of the next generation of investors,” Seyi Bucknor, head of Newton Americas, said in the statement.
“Younger investors increasingly want to see their values, interests and concerns reflected in their investment decisions. The study has fascinating things to tell our industry about how millennials, who have a long investing horizon, are thinking about sustainable investing as it relates to retirement planning.”
— Check out ESG Fund Ratings: Not Perfect, but Still Valuable on ThinkAdvisor.