ESG is becoming mainstream, but clients need more guidance

Companies are accountable for more than just shareholders according to investors responding to a Natixis Investment Managers survey

ESG is becoming mainstream, but clients need more guidance
Steve Randall

North America is now leading the way on ESG investing as it continues to adopt a mainstream position.

Natixis Investment Managers says that global demand for ESG investing is accelerating and is no longer the domain of millennials, women, wealthy, and European investors.

The environment is the top driver of this increase and 60% of respondents to the firm’s global survey of individual investors say that companies are no longer only responsible for creating value for shareholders.

In fact, more than three quarters of respondents believe that they, as investors, have a responsibility to hold companies to account for their impact on society.

“As ESG becomes more widely adopted and investors learn more about the different kinds of ESG investments, interest in ESG investing is growing rapidly, reinforced by positive returns from these strategies,” said Nathalie Wallace, global head of sustainable investing at Natixis Investment Managers.

More than half of investors (53%) believe the best way to send a message to a company is to sell its stock and 55% believe fund managers also should sell their shares in companies with poor ESG records.

Who’s interested in ESG?

While still skewing younger, mainstream adoption of ESG factors was always going to require buy-in from older, established investors and the survey shows this is happening.

One in four (27%) millennials say they are invested in ESG, but so do 20% of those in Generation X and 18% of Boomers. Interest in ESG is high across all age segments, including 52% of millennials, 52% of Generation X and 44% of Boomers.

Despite taking the early lead on ESG investing, Europe (22%) now lags North America (28%) and is matched by Asia (22%). Latin America is a laggard (13%) but this is likely to change in time due to high levels of interest.

Canada has some catching up to do though, as the North American ESG investment figure is dominated by those in the United States with 32% of respondents owning ESG investments compared to just 16% of Canadians.

Having the talk

Awareness of ESG is high, with just 17% of investors saying they don’t know what ESG is, but 41% say don’t know enough about ESG and this is stopping them from using the strategies at all or as much as they might.

Financial advisors have a role to play in educating clients in these factors and the survey found that they should broaden these conversations with more clients.

While 59% investors worldwide say their advisor has spoken to them about ESG investments, and 56% say their advisor proactively has asked them about whether are ESG issues that are important to them, engagement is highest with younger investors.

“Increasingly, individual investors believe the ESG investment decision-making process should involve all of the parties in investing, including financial advisors, fund managers and investors themselves,” said Dave Goodsell, executive director at Natixis IM Center for Investor Insight. “This is another example of how mainstream ESG has become in investing, and its potential for becoming among the most critical decision points for investments.”