Some investors want to use their investable assets to send a message. Often, the message is a negative one rather than a positive one, as in “I won’t invest in your company until you stop…” whatever action might be deemed socially repugnant.
At the same time, there are investors who invest heavily into companies which openly support socially conscious causes, such as the environment, taking a proactive approach to investing in order to promote a cause.
Then there are investors who invest only for financial gain and not with an approach that carries any other weight.
Spectrem’s new study on investors and their attitudes towards investing with a socially motivated purpose looks at just how widespread such investing is. Investor Perceptions of Socially Responsible Investing examines the details surrounding socially responsible investing, while also determining whether advisors promote the concept to their clients.
“Socially responsible investing is not for everyone," said Spectrem president George H. Walper Jr. “Our research shows that many investors concern themselves only with return on investment. But for those investors who want to direct their investable assets towards worthy causes, the options are diverse and can be complicated. Advisors can certainly guide investors toward products which address social issues.”
The most notable form of socially responsible investing is investing in environmentally friendly companies or mutual funds. Seventy-one percent of investors consider that sort of direction to be a social responsible option for investments.
The other type of positive investment direction is investing in companies which promote fair wages, or are known for being active in charitable giving. Forty-eight percent of investors see that as an option for socially responsible investing.
Rather than invest in companies which promote and support social causes, investors can choose to avoid investing in companies which violate principles in which the investor believes. Fifty-five percent of investors believe they can avoid companies which manufacture products in countries which regularly violate human rights. Fifty-four percent consider it viable to avoid investing in companies that manufacture or promote tobacco and smoking.
There are several other examples of investment avoidance, in companies which sponsor gambling, promote pornography or guns, as well as those who test products on animals. However, the percentage of investors who consider companies of that sort as investments to avoid is below 50 percent, and several run below one-third of all investors.
There are investors for whom socially responsible investing is a hot topic, but the overall concept of socially responsible investing is not well-known among affluent investors. Asked to place their familiarity with the concept on a 0-to-100 scale, investors overall placed their knowledge at 44.57, with only slight degrees of difference based on age (with Baby Boomers leading the way).
Top Takeaways for Advisors
For clients who are simply looking for the biggest bang for their buck, socially responsible investing is not different than any other pointed investment strategy (by country or industry, for example). Many investors are not going to express much interest in what the company does, only in what the company’s stock price is doing.
However, there are mutual funds and exchange-traded funds which are based on companies with similar corporate backgrounds, including socially responsible ones. Investors with an eye toward making a difference with their investable assets can be led to those types of investments, and advisors need to have those funds top of mind for those times when an investor comes in with a socially responsible bend to their investment strategy.
©2018 Spectrem Group