Major new study reveals that investors want their fund managers to actively engage with management of unsustainable companies
The environment element of ESG remains dominant among millennial and Gen-Z investors but that should not mean a simple option for investment managers.
Despite strong opinions on the protection of our environment, the study found that millennials do not simply want their fund managers to pick sustainable investments for their portfolio – they want them to actively engage in changing corporate behaviour.
The survey from Newton Investment Management found that 43% of younger investors (18-39) said they would prefer engagement with the management of unsustainable companies rather than only investing in sustainable options. Among older investors (aged 50+) just 19% said this.
“We believe that ESG is not a label, it’s finance 101,” said Andrew Parry, Head of Sustainable Investment, Newton Investment Management. “That is, environmental, social, and governance insights are not add-ons, but part of the mosaic of inputs that influence good investing decisions. That’s a message that’s resonating more and more with investors, and one we believe the study findings help to underscore.”
Environment is the most important of the three components of ESG, 39% said so compared to 28% for social, and 23% for governance (10% said none of the three).
But that does not mean that the investment industry should focus less on governance.
“While today’s individual investors are most concerned with environmental issues, it is in the area of corporate governance—in the form of active engagement with leadership at companies and informed proxy voting power—where the asset management industry might exert its largest and most immediate positive influence,” said Parry.
Awareness gap
The study suggests a gap in awareness of sustainable investing, particularly among older investors; 86% of adults 39 or younger are interested in sustainable investing, compared with 70% of over 55s.
Across all age groups, 36% said that their retirement pension plan did not have sustainable options and 44% were not aware if their plan did or not. Even among self-directed investors, around 1 in 5 were aware of a sustainable option.
Of those investors who recognized they had a sustainable-investing option, however, more than half of study participants (53%) chose to use it, with more than five times the number of millennials in that group choosing the option over Baby Boomers.
“The study data is profound in terms of what it suggests about the future of investing and how companies might better align themselves with the concerns of the next generation of investors,” said Seyi Bucknor, Head of Newton Americas for Newton Investment Management. “Younger investors increasingly want to see their values, interests, and concerns reflected in their investment decisions.”
