ESG investing, or investing in stocks based on their environmental, social and corporate governance practices, may seem like just another buzzword. But a new survey shows how much investors value these principles.
Four out of five investors say it's important to them to invest in companies that align with their personal values, according to a new IBD/TIPP survey. That includes 35% who say it's very important.
That priority spans age groups from 25 years old to 65-plus. It's especially strong among women, with 87% placing importance on investing in stocks that fit their values. And it's highest among investors with annual incomes of $50,000 to $75,000, at 90%.
"ESG investing is likely to grow in the coming years because the essence of ESG investing aligns perfectly with Americans' values," said Raghavan Mayur, president of TechnoMetrica Market Intelligence, who directs the IBD/TIPP Poll.
Even more eye-opening than the broad importance of socially responsible investing are investor attitudes toward specific issues. The IBD/TIPP survey asked investors to rate the importance of five distinct ESG investing attributes in comparison to investment returns when they pick a company to invest in. Results are surprising.
ESG Investing Values Vs. Stock Profits
Investors say three of the five ESG investing factors are more important than how much money they make. And the other two factors are within earshot of 50%.
"Americans believe that workplace safety, fair employee wages and economic commitment to communities are more important than profits," Mayur said.
The company's commitment to a safe work environment gets the highest support. Seventy-five percent of investors call it more important than investment profits.
A commitment to fair employee wages is next, rated most important by 73%. And 59% of investors say a commitment to promoting economic growth in poor communities is most important, not making money.
Two other ESG investing factors rate somewhat below profits in importance. When comparing investment returns against gender, ethnic and racial diversity in management and the workforce, 46% say diversity is more important while 51% feel investment returns are. And the company's commitment to the environment — the big "E" in ESG investing — is most important to 45% of investors vs. 53% who consider investment profits more important.
Social Impact Investing Influences ETF Strategies
Despite investors' strong support for values-based investing, the term ESG investing itself is not widely understood. Only 28% of investors say they are somewhat or very familiar with the topic of sustainable or ESG investing.
The concept goes by various names. Other buzzwords: socially responsible investing, social impact investing and sustainable investing.
Whatever the label, the financial industry has been rolling out a steady stream of products to address investor preferences. These include ESG or similarly themed ETFs, mutual funds and advice.
"The popularity of ETFs is a catalyst helping ESG investing," Mayur said. "Further, ESG investing is appealing to the investors of the future — the younger generation, so it is here to stay."
The IBD/TIPP survey was conducted Oct. 24 to Oct. 31. It included live interviews of 549 investors via mobile phone or landline.
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