Knowledge and understanding are weak according to a new survey by Wells Fargo
The sustainable investment space is growing globally, but in at least one major market, there is a widespread lack of knowledge and understanding among investors.
US lender Wells Fargo has surveyed adults in households with stocks, bonds, or mutual funds of at least US$10,000, either in investment accounts or retirement savings accounts.
And the poll shows that there is more that FAs can do to educate clients.
It found that three in four investors are not familiar with the concept of sustainable investing. Relatively few said their financial advisor or other professional had provided information about it.
Of those who were aware of sustainable investing, 24% said it was as a result of their own research.
When they were told more, 71% of respondents showed interest in purchasing stocks in companies that aligned with their values.
The knowledge gap suggests an opportunity for sustainable investing to achieve exponential growth.
“The consumer demand we see today for sustainable investing is just the tip of a potential iceberg,” said Tracie McMillion, head of Global Asset Allocation Strategy for Wells Fargo Investment Institute. “US investors’ fundamental desire to align their investments with their personal preferences, combined with their lack of exposure to information about sustainable investing to date, points to significant growth in this market as consumer awareness grows.”
Concerns about performance
Once awareness and deeper knowledge is addressed, there are some concerns among investors that sustainable investments will not perform well (37%).
However, investors are inclined to believe that sustainable investing funds perform well, with 69% believing they perform on par with the market average, far exceeding the 24% who think they perform worse. Another 7% believe they perform above par.
Respondents said they would ideally allocate 26% of their investment portfolio to sustainable investing.
“These findings clearly show that investors are hungry for both information about sustainable investing as well as investment options that reflect their personal preferences,” said Hannah Skeates, global head of Sustainable Investing at Wells Fargo Asset Management. “This should serve as a wake-up call for the industry to do a better job of providing sustainable investing resources and vehicles to investors.”
Climate change focus
Investors see the benefit of sustainable investing in protecting the environment.
Almost six in ten respondents said they had personally experienced an extreme weather event and more than half had considered how climate change will impact their investment portfolio.
When purchasing stocks, female investors are more likely than male investors to give a lot or a fair amount of thought to the social values espoused by corporate leadership (48% vs. 35%) and the company’s environmental record (45% vs. 35%).
Women (60%) are more likely than men (44%) to express interest in investing in sustainable investing funds.
Younger investors (Millennials and Gen-X) are also twice as likely than Boomers or Silent Generation to say they would definitely include sustainable investment funds in their portfolios. Although this would depend on certainty of performance.