Americans turn to sustainable investing
26 April 2019 at 4:23 pm
More than 70 per cent of Americans are interested in ethical investing and it isn’t just millennials leading the charge, new research suggests.
A report from US financial services firm Morningstar said the popularity of sustainable investing – the use of environmental, social, and governance factors to assess investing options – has grown tremendously in recent years.
Researchers said while many financial professionals saw sustainable investing as a fringe concern that only interested millennials and women, the evidence showed otherwise.
Morningstar surveyed 948 respondents about their investment choices and found 72 per cent held at least a moderate interest in sustainable investing.
The results indicated that gender was not a useful gauge for determining interest in sustainable investments.
“We found that while women have a slightly stronger preference for sustainable investing than men… the difference between the weighted averages was small (about 5.5 per cent),” the report said.
“Furthermore, this small difference disappeared after controlling for income, age, political ideology, religiosity, risk tolerance, financial literacy, and other sociodemographic variables.”
The results also disproved the idea that different generations had substantially different preferences for sustainable investing.
Comparing the average sustainability preference scores of millennials, generation X, and baby boomers, the average preference score for millennials and gen X were statistically equivalent.
And while millennials did on average show a slightly stronger preference for sustainable investing than boomers (about 8 per cent), the difference evaporated after including sociodemographic variables.
“The dominant industry narrative says that interest in sustainable investing among retail investors is confined to a niche market of mostly millennials and women,” the report said.
“Our results suggest that there may be a broader appetite for sustainable investing.”
Ryan Murphy, head of decision sciences at Morningstar and co-author of the report, said a lot of people cared about sustainability.
“This is not just a fringe preference,” Murphy told CNBC.
“The idea that this is of interest [only] to a subgroup doesn’t really hold.”
A similar survey last year found a growing number of high net worth investors in the US were turning to impact investment, with millennials (87 per cent), generation X (65 percent) and women (64 per cent) most likely to ethically invest.