A new survey finds that concerns about greenwashing continue to increase, but apparently that has not deterred the overall appeal of impact investing.
Half or more of respondents in the U.S. (50%), UK (58%), Germany (50%) and Australia (51%) believe greenwashing has increased, according to American Century Investments’ fifth impact investing survey. Despite this, fewer than half of respondents in the U.S. (44%), UK (39%), Germany (38%) and Australia (39%) reported that greenwashing influenced their interest in impact investing. For purposes of the survey, greenwashing is defined as conveying a false impression about a company’s sustainability.
In fact, the appeal of impact investing has reached all-time highs. In the U.S., 61% of respondents found impact investing appealing, up from 51% in 2020. Similarly, the appeal in the UK rose to 63%, up from 48% in 2020. In Germany the appeal increased from 35% in 2020 to 44% in 2021, while Australia, which was new to the survey in 2021, came in at 57%.
The lower appeal of impact investing by German respondents relative to the other countries was driven by the statistically significant larger share of respondents who reported that they didn’t know if it was appealing or not (35%) than in the U.S. (17%), UK (17%) or Australia (18%), American Century notes. The survey also found that statistically similar shares of respondents in the U.S. (22%), UK (20%), Germany and (21%) Australia (24%) indicated that they found impact investing unappealing.
Demographic Differences
Not surprisingly, the appeal of impact investing was even higher among Millennials (66%) and Gen Xers (64%) in the U.S., as well as Millennials (67%) in the UK, and Millennials (68%) and Gen Xers (60%) in Australia. In the U.S., just under half of Millennials (45%) and Gen Xers (48%) currently invest. Among those who do not, at least 3 in 10 Millennials (33%) and Gen Xers (30%) plan to invest within the next five years.
While Baby Boomers generally found impact investing less appealing than the overall population, their interest increased year over year in each country. For instance, the appeal of impact investing increased by 10 points to 55% for American Baby Boomers, by 29 points to 63% for UK Baby Boomers and by six points to 32% for German Baby Boomers.
Impact investing also gained appeal for both men and women, American Century notes. In the U.S., appeal was up to 63% for men (from 57% in 2020) and 59% for women (from 46% in 2020). Similarly, in the UK, appeal was up to 66% for men (from 48% in 2020) and 60% for women (from 48% in 2020). In Germany, appeal was up to 50% for men (from 40% in 2020) and 38% for women (from 29% in 2020). In all four countries, women were less likely than men to say impact investing was unappealing.
“We see a rising demand across geography, generation and gender, along with favorable economics and a supportive political and regulatory environment that will drive changes and advances in sustainable investing over the coming year,” said Sarah Bratton Hughes, Senior Vice President and head of ESG and sustainable investing for American Century Investments.
Hughes observes that not only is greenwashing expected to remain a concern, it will expand beyond environmental or climate claims to those related to all sustainable development goals. “The combination of regulatory pressure, investor demand and industry cooperation will help drive clarity, consistency and transparency across the sustainable investing space,” she notes.
Concerns and Priorities
Meanwhile, the top cause for respondents in the UK (34%), Australia (30%) and Germany (34%) was the environment and climate change, while in the U.S. the top concern was health care and disease prevention and cures (25%). In addition to those concerns, American Century also found, as part of its 2022 ESG outlook, that empowerment (labor), sustainable living and digitalization (cyber) are areas that will lead the ESG space in the coming years.
When making investments, return on investment, risks, fees and length of time the money will be invested remain top considerations among U.S. respondents, but 64% indicated that impact on society is either “very or somewhat important”—up from 42% in the 2016 U.S. study.
Surprisingly, the survey also found an increasing share of people willing to sacrifice returns for a positive impact. In the U.S., for example, 38% of respondents—including half of U.S. Millennial respondents—reported a willingness to sacrifice returns for a positive impact, up from 33% in 2020.
“In our view, this trade-off isn't necessary and isn't the future of sustainable investing. Sustainable investing is more than just a risk mitigator. We believe it’s an alpha generator,” says Hughes. “This is alpha plus: sustainable and impact strategies have the potential to provide market-beating returns coupled with societal and environmental alpha.”
The survey was conducted in November 2021 among a representative sample of more than 1,000 adults each in the U.S., UK, Germany and Australia, resulting in a total of more than 4,000 respondents.
