Findings from the latest Wells Fargo/Gallup Investor and Retirement Optimism Index survey (conducted February 10–16, 2020) reveal significant opportunities for our industry to help investors learn about sustainable investing and align their investments with their personal preferences and sustainability values.
According to the survey, a large majority of U.S. retail investors aren’t yet familiar with the concept of sustainable investing—but once they learn what it is, many of them express interest in investing in companies that fit with their values. We in Wells Fargo’s Wealth & Investment Management businesses can help investors in both of these areas.
You don’t know what you don’t know
Three in four U.S. investors say they’ve heard little or nothing about sustainable investing, according to the survey, and only 25% have heard a lot or a fair amount.
As it turns out, this lack of familiarity is the biggest reason investors give for not currently using sustainable investing funds. Nearly half (47%) of investors who don’t currently engage in sustainable investing say that not knowing enough about it is a major factor explaining their lack of participation. Another 24% say it’s a minor factor.
More than one-third of investors (37%) cite the fact that their advisor or 401(k) plan doesn’t offer sustainable funds as a major factor, while 14% say this is a minor factor.
For the minority of investors who are already aware of sustainable investing, most of what they’ve learned on the topic has come from their own research—not from a financial professional, a family member or friend, or even through the media.
Only 12% of investors in the survey say they’ve heard about sustainable investing from a personal financial advisor. Among employed investors with a 401(k), just 4% learned about sustainable investing through their employer’s 401(k) program.
Helping investors learn about sustainable investing drives interest and appeal
In the survey, sustainable investing was defined for respondents as “a broad term that includes ‘environmental, social, and governance’ (ESG) investing, ‘responsible investing,’ and ‘social impact investing.’” They also learned that it “involves choosing investments based on the effect they have on things like the environment, human rights, diversity, and other social values, in addition to investment returns.”
Learning what sustainable investing actually means drew a strongly favorable response from many of the investors surveyed. The slight majority (52%) say they are very or somewhat interested in using sustainable investing funds and 7 in 10 (72%) would ideally allocate some portion of their investment portfolio (26% on average) to them.
Also, two-thirds of employed investors say they’d definitely (28%) or probably (41%) include sustainable funds as part of their 401(k) if their employer offered them.
Even before being told about sustainable investing in the survey, about 7 in 10 of all investors said they’d be very or somewhat likely to purchase stock or funds invested in companies that align with their values.
From my perspective, these findings show that investors are hungry for both information about sustainable investing as well as investment options that reflect their personal preferences. This should serve as a wake-up call for our industry to do a better job of providing sustainable investing resources and vehicles to investors.
Investors clearly are ready and waiting for us to help them learn more about sustainable investing and to provide access to investments intended to fulfill these wider objectives.
Hannah Skeates is the global head of ESG for Wells Fargo Asset Management.
Note: What’s the impact of COVID-19 on ESG and sustainable investing? Read our blog post in which we explore the pandemic’s effects through a long-term lens.