Betterment recently surveyed 1,000 U.S. investors to examine their level of understanding of ESG investments, what might make them interested in investing, as well as the role employers and advisors play. Here’s what they found.
Many of the respondents are either already invested in ESG or are interested in doing so. Apparently, however, there is still an education gap when it comes to ESG-themed investments, according to the survey. More than a quarter of respondents (26%) indicated that they currently hold some type of ESG-themed investment, while 46% of those who have not sought out ESG investment options would be interested in doing so.
More than half of respondents (54%) expressed a level of unfamiliarity with ESG. In addition, more than a third (35%) indicated they have never sought out ESG investments and are not interested in doing so. The majority (51%) of those who indicated they were not interested said it was because they do not understand ESG-themed investments well enough.
Employer Input
Betterment’s survey also found that employees want more from their HR/benefits teams—including the option to invest sustainably. In December, Betterment examined how the Great Resignation has affected employees’ views on benefits, as well as what employers can do to match these changing demands. Continuing this conversation, the firm looked at the role employers can take in better educating their employees on investment options and whether the employees currently have the option to invest sustainably through an employer-sponsored plan.
According to the findings, 40% of respondents do not know what kind of companies their retirement plan is invested in. However, of those that do, 72% indicated they would be likely to contribute more to their retirement account if they were given the option to invest sustainably.
In addition, 22% indicated that they have proactively asked their employer’s HR/benefits department if ESG investing options are available in their workplace retirement plan and another 36% would be interested to know if there is an option.
Financial Outcomes
When asked about the interaction between financial outcomes and values-based impact, 86% of respondents indicated that it was at least “somewhat important” that their investments reflect their values and morals. That said, returns are also top of mind, even in the realm of sustainable investing.
But when asked to weigh returns relative to other objectives, 58% ranked “I want my investments to get the highest returns possible” as their highest priority, while only 17% ranked “I want my investment in a company to have an impact beyond my portfolio’s growth” highest.
Improving investment performance was cited by 37% as their primary motivation for investing in—or wanting to invest in—ESG funds, while improving the world was the primary motivation for only 17%. At the same time, 46% said these two have equal importance, possibly reflecting a growing public awareness of research indicating that ESG-themed investing does not necessarily entail sacrificing returns, the report suggests.
Advisor Input
Betterment’s survey also looked at how many respondents are working with financial advisors, and if so, how much they are talking with them about ESG investment options. According to the findings, if rising investor interest in ESG activity is on advisors’ radars, it has not translated into more investments. Here, Betterment found that 58% of respondents have a personal financial advisor who manages at least a portion of their portfolio. Yet, only 44% of respondents who work with a financial advisor indicated their advisor has discussed available ESG-based portfolio options with them.
However, nearly half (47%) said that access to ESG investment opportunities would make them more likely to work with an advisor, while only 6% indicated they would be less likely. “This would suggest an advisor’s practice can be more successful if they include ESG investment options for both existing clients as well as prospective clients,” says Jon Mauney, General Manager of Betterment for Advisors.
Crypto Conflict
Betterment also set out to assess any interaction between investors’ posture towards crypto on the one hand and towards sustainable investing on the other. Notably, 37% of respondents said they currently invest in cryptocurrencies and 62% said they are aware about the concerns that have been raised about the environmental impact of crypto mining.
Yet, while those holding an ESG-themed investment were significantly more aware of sustainability concerns raised about crypto, a full 80% of those holding an ESG-themed investment also held crypto investments, versus only 22% of those without ESG-themed investments. Still, 90% of those invested in crypto said it was important that major cryptocurrencies become more environmentally friendly.
“While this strong correlation might seem counterintuitive, it could also follow that an ESG investor is more likely to engage with any relatively new trend in investing, whatever it might be,” the report observes.
Betterment’s survey was conducted in April by the Schlesinger Group.
