Responsible investing is about more than values for HNWIs

Wealthiest investors say that advisors who talk to them about the topic are more forward thinking

Responsible investing is about more than values for HNWIs
Steve Randall

Responsible investing may be chosen by some because it aligns with their personal values but for most of the wealthiest investors performance is key.

While more than six in ten high-net-worth-individuals (HNWIs) who responded to a recent survey said that making a positive impact on society is high priority, 85% said they will only choose a responsible investment if the returns are the same or better than other options.

The poll from investment manager Nuveen also asked hundreds of financial advisors about their clients’ portfolios and how responsible investments (RI) have performed.

More than two thirds of advisors said that investors who incorporate RI in their portfolios typically outperform those without responsible investments – up significantly compared to 28% of those surveyed last year.  

Almost two thirds of advisors reported that their clients' portfolios with RI achieved above market-rate returns in the past year.

Performance as a driver
While environmental, social, and governance (ESG) factors are important to wealthy investors, 53% said that better performance was their reason for picking RI.

Seven in ten advisors noted that their HNWI clients’ RI decisions were driven by performance and superior risk management.

"The global pandemic and recent social unrest have further underscored the desire of many to make a difference. Investing with a responsible approach has become a preferred method to concretely address important issues, such as social justice, climate change and fairness in the workplace," said Amy O'Brien, global head of responsible investing at Nuveen. "Investors increasingly understand that promoting positive outcomes on important ESG issues, not only minimizes portfolio risks, it actually leads to improved performance overall."

“Forward thinking” advisors
The survey shows that financial advisors who talk to their wealthy clients about RI are considered more forward thinking – 83% of clients said so.

Almost two thirds of advisors said they had raised the issue in client meetings in the last year but 56% of investors would prefer their advisors to be more active in helping them invest in ways that have a positive impact.

This includes advisors highlighting corporate scandals to their clients; around three quarters of investors said this is important to them.

Half of investors said they have acted on information about scandals or questionable behaviour, with 23% having sold their investment.

ESG resonates
Investors said that the components of ESG resonate with them and 91% agreed that companies need to enact more policies that make them more accountable to shareholder concerns and 82% noting that companies with strong governance practices can reduce risk. 

The survey found that there is still more to do to inform HNWI clients about RI with 79% of advisors saying they still find it challenging to help these investors understand the true definition of RI, compared to 68% last year.

Almost six in ten investors said they would like to invest responsibly but don’t know their options.