ESG Information Sources

3/1/2022

ESG, or Environmental, Social, and Governance investing has been around for quite a while, allowing investors to invest not only for the pursuit of profit but also for the greater good.  Protecting the environment, investing in racially diverse companies, and avoiding companies or countries that are not operating in an ethical manner is just a small part of this type of investing. Knowing where to gain this information can sometimes be even more complicated than the information itself.

Spectrem Group recently conducted research with wealthy investors on the topic of ESG and found that the sources of information regarding ESG can vary. The most commonly used source for information on ESG investing was a financial advisor, with 43 percent of wealthy investors using an advisor for ESG information. Eleven percent use websites like Motley Fool or Investopedia. Nine percent of wealthy investors seek out information on ESG investing from financial publications.

Reaching out to an advisor for information regarding ESG is the most logical source of information, so it is not surprising that wealthy investors utilize that source over all other sources. This remains the most commonly used source of information regardless of age or wealth. Younger investors are slightly more likely to look to other sources of information besides just their advisor, however. Nineteen percent of Millennials feel that socially responsible organizations would be the most likely source for information on ESG investing, while 18 percent feel they would use a friend or family member to gain information on ESG.

Seeking this information out is important for any investor who is considering investing in this type of investment, especially since ESG is not an investment many investors are familiar with. Less than 10 percent of wealthy investors feel they are very familiar with ESG investing, although that percentage jumps up to over a third among Millennials. Eighty-five percent of WWII investors are not very or not at all familiar with ESG investing.

Familiarity with ESG varies by wealth significantly as well. While 27 percent of investors with a net worth between $15MM-$25MM are very familiar with ESG investing, zero percent of investors who have a net worth between $100K-$499K are familiar. As wealth increases so does the level of familiarity. This is not surprising as investors at lower levels of wealth may not have as much exposure to these types of investment options.

Gaining a proper knowledge of this investment type also requires that a distinction be made between ESG and some other similar types of investing, such as sustainable investing. Thirty-five percent of wealthy investors feel that ESG investing is the same thing as sustainable investing. ESG investing does include sustainable investing objectives but expands far beyond that of what is included in typical sustainable investing options.

ESG continues to gain popularity and interest among wealthy investors, so access to information regarding this investment strategy, as well as investment options, are likely to continue to increase over the next several years. Companies are taking notice regarding the level of interest in ESG and may make changes in their structure, board of directors, senior management, or offices in order to more adequately meet the criteria of ESG investing.