Majority of investors say they would be likely to invest in
companies that align with their values
Three in four U.S. investors are not familiar with the concept
of sustainable investing, saying they have heard little or nothing
about it, according to the latest Wells Fargo/Gallup Investor and
Retirement Optimism Index survey. This is in part because
relatively few U.S. investors report hearing about sustainable
investing from a financial professional, family members or friends,
or through the media. For 24% of U.S. investors, their largest
source of investment knowledge comes from their own research.
However, when informed about sustainable investing, a majority
of investors express interest in learning more and believe it
performs on par with or better than the market average. Moreover,
71% of investors say they would be very or somewhat likely to
purchase stock or funds invested in companies that align with their
values.
“The consumer demand we see today for sustainable investing is
just the tip of a potential iceberg,” said Tracie McMillion, head
of Global Asset Allocation Strategy for Wells Fargo Investment
Institute. “U.S. investors’ fundamental desire to align their
investments with their personal preferences, combined with their
lack of exposure to information about sustainable investing to
date, points to significant growth in this market as consumer
awareness grows.”
According to the survey, 25% of investors have heard a lot or a
fair amount about sustainable investing funds, while 38% have heard
only a little and 37% nothing. Only 12% of investors say they have
heard about sustainable investing from a personal financial advisor
and 9% from an investment or fund manager. Among employed investors
with a 401(k), just 4% have heard about sustainable investing
through their employer’s 401(k) program.
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 is a minor factor.
- A third (34%) say that concern the investments won’t perform
well is a major factor, and 28% say it’s a minor factor.
- More than a third (37%) say that their advisor or 401(k) plan
not offering the funds is a major factor, with 14% citing this as a
minor factor.
The Wells Fargo/Gallup Investor and Retirement Optimism Index
survey was conducted online Feb. 10-16, using the Gallup Panel. One
in nine investors (11%) polled for the survey reports having money
invested in sustainable investing funds. The results are based on
1,029 U.S. adults with $10,000 or more invested in stocks or bonds,
either individually or as part of a retirement or mutual fund.
Investor optimism was at 20-year high before COVID-19
correction
At the time of the survey, the Dow Jones Industrial Average was
consistently above 29,000 following the release of the government’s
upbeat employment report in early February. This was before the
start of the market downturn triggered by mounting concerns over
the spread of COVID-19. As such, the Wells Fargo/Gallup Investor
and Retirement Optimism Index had soared to 138 in Q1 from 84 in
Q4-2019, reaching its highest level since Q1-2000.
Sustainable investing appeals to half of investors
When presented with the full definition of sustainable
investing, 52% of U.S. investors say they are very or somewhat
interested in it, while nearly half are not too (29%) or not at all
(18%) interested. On average, investors say they would ideally
allocate a sizeable portion – 26% – of their investment portfolio
to sustainable investing.
Additionally, two-thirds of employed investors say they would
definitely (28%) or probably (41%) include sustainable funds as
part of their 401(k) if their employer offered them. More than four
in 10 employed investors (44%) say they would view their employer
more positively if they made sustainable investing funds available
in their plan’s investment options.
“These findings clearly show that investors are hungry for both
information about sustainable investing as well as investment
options that reflect their personal preferences,” said Hannah
Skeates, global head of Sustainable Investing at Wells Fargo Asset
Management. “This should serve as a wake-up call for the industry
to do a better job of providing sustainable investing resources and
vehicles to investors.”
In fact, investors are already inclined to believe that
sustainable investing funds perform well, with 69% believing they
perform on par with the market average, far exceeding the 24% who
think they perform worse. Another 7% believe they perform above
par.
Environmental risk may be more tangible to the nearly six in 10
investors (58%) who say they have personally experienced an extreme
weather event (unusually severe temperatures, storms, drought,
fires etc.) in the past few years. However, investors report giving
more thought to how climate change may affect the performance of
their investments than to how their investments may affect the
environment. Specifically, 51% say they have given a lot or a fair
amount of thought to the effect climate change will have on their
investment returns in such sectors as energy, agriculture and real
estate. By contrast, 40% report giving the same level of thought to
the environmental record or impact of companies when making
investments.
Women, millennials and Generation X more drawn to sustainable
investing
Across a number of measures, women, millennials and Generation X
express more interest in aligning their investments with their
personal values:
- When purchasing stocks, female investors are more likely than
male investors to give a lot or a fair amount of thought to the
social values espoused by corporate leadership (48% vs. 35%) and
the company’s environmental record (45% vs. 35%).
- Women (60%) are more likely than men (44%) to express interest
in investing in sustainable investing funds.
- Women (78%) are more likely than men (61%) to say that, if
available, they would include sustainable investing funds in their
401(k). Women (53%) are also more likely than men (35%) to say they
would view their employer positively for offering them.
- Millennials (36%) and Gen Xers (29%) are more likely than baby
boomers/silent generation (13%) to say they would definitely
include sustainable investing funds in their 401(k) if offered by
their employer.
- Millennials (62%) are much more likely than Gen Xers (37%) and
baby boomers/silent generation (30%) to say they would feel more
positively toward their employer if they offered sustainable
investing funds.
- Millennials (60%) and Gen Xers (50%) are more likely than baby
boomers/silent generation (29%) to say they would be very likely to
purchase sustainable investing funds if they could be certain of
returns.
About the Wells Fargo/Gallup Investor and Retirement Optimism
Index
The results of this Wells Fargo/Gallup Investor and Retirement
Optimism Index are based on a Gallup Panel web study completed by
1,029 U.S. investors, aged 18 and older, Feb. 10-16, 2020. The
Gallup Panel is a probability-based longitudinal panel of U.S.
adults who Gallup selects using random-digit-dial phone interviews
that cover landline and cellphones. Gallup also uses address-based
sampling methods to recruit Panel members. The Gallup Panel is not
an opt-in panel. The sample for this study was weighted to be
demographically representative of the U.S. adult population, using
the most recent Current Population Survey figures. For results
based on this sample, one can say that the maximum margin of
sampling error is ±6 percentage points at the 95% confidence level.
Margins of error are higher for subsamples. In addition to sampling
error, question wording and practical difficulties in conducting
surveys can introduce error and bias into the findings of public
opinion polls.
The survey defined sustainable investing for respondents as “a
broad term that includes ‘environmental, social and governance’
(ESG) investing, ‘responsible investing’ and ‘social impact
investing.’” Respondents were further told 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.”
For this study, the U.S. investor is defined as an adult in a
household with stocks, bonds or mutual funds of $10,000 or more,
either in an investment account or in a self-directed IRA or 401(k)
retirement account. About two in five U.S. households have at least
$10,000 in such investments. The sample consists of 68%
non-retirees and 32% retirees. Of total respondents, 43% reported
annual incomes of less than $90,000; 57% reported $90,000 or more.
The Wells Fargo/Gallup Investor and Retirement Optimism Index is an
enhanced version of Gallup’s Index of Investor Optimism, which
provides the historical trend data. The median age of the
non-retired investor is 45 and the retiree is 68.
The Wells Fargo/Gallup Index of Investor Optimism has an
adjusted baseline score of 100 from when it was established in
October 1996. It peaked at +152 in January 2000, at the height of
the dot-com boom, and hit a low of -81 in February 2009.
About Wells Fargo Asset Management
Wells Fargo Asset Management (WFAM) is the trade name for
certain investment advisory/management firms owned by Wells Fargo
& Company. These firms include but are not limited to Wells
Capital Management Incorporated and Wells Fargo Funds Management,
LLC. Certain products managed by WFAM entities are distributed by
Wells Fargo Funds Distributor, LLC (a broker-dealer and Member
FINRA). This material is for general informational and educational
purposes only and is NOT intended to provide investment advice or a
recommendation of any kind—including a recommendation for any
specific investment, strategy, or plan. PAR-0420-06271
More information is available at WFAM ESG Investing.
About the Wells Fargo Investment Institute
Wells Fargo Investment Institute is a registered investment
adviser and wholly owned subsidiary of Wells Fargo Bank, N.A., a
bank affiliate of Wells Fargo & Company, providing investment
research, strategy, manager research and thought leadership within
the Wealth and Investment Management division, with the goal of
supplying world-class advice to the company’s financial and wealth
advisers.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a diversified,
community-based financial services company with $1.98 trillion in
assets. Wells Fargo’s vision is to satisfy our customers’ financial
needs and help them succeed financially. Founded in 1852 and
headquartered in San Francisco, Wells Fargo provides banking,
investment and mortgage products and services, as well as consumer
and commercial finance, through 7,400 locations, more than 13,000
ATMs, the internet (wellsfargo.com) and mobile banking, and has
offices in 31 countries and territories to support customers who
conduct business in the global economy. With approximately 263,000
employees, Wells Fargo serves one in three households in the United
States. Wells Fargo & Company was ranked No. 29 on Fortune’s
2019 rankings of America’s largest corporations. News, insights and
perspectives from Wells Fargo are also available at Wells Fargo
Stories.
Additional information may be found at www.wellsfargo.com |
Twitter: @WellsFargo.
Stock values fluctuate in response to the activities of
individual companies and general market and economic conditions.
Bond values fluctuate in response to the financial condition of
individual issuers, general market and economic conditions, and
changes in interest rates. Changes in market conditions and
government policies may lead to periods of heightened volatility in
the bond market and reduced liquidity for certain bonds held by the
fund. In general, when interest rates rise, bond values fall and
investors may lose principal value. Interest rate changes and their
impact on the fund and its share price can be sudden and
unpredictable. Investing in environmental, social, and governance
(ESG) carries the risk that, under certain market conditions, the
investments may underperform products that invest in a broader
array of investments. In addition, some ESG investments may be
dependent on government tax incentives and subsidies and on
political support for certain environmental technologies and
companies. The ESG sector also may have challenges such as a
limited number of issuers and liquidity in the market, including a
robust secondary market. Investing primarily in responsible
investments carries the risk that, under certain market conditions,
an investment may underperform funds that do not use a responsible
investment strategy.
INVESTMENT PRODUCTS: NOT FDIC INSURED • NO
BANK GUARANTEE • MAY LOSE VALUE
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version on businesswire.com: https://www.businesswire.com/news/home/20200416005148/en/
Allison Chin-Leong, 212-214-6674
allison.chin-leong@wellsfargo.com Rob Julavits, 917-260-2448
robert.w.julavits@wellsfargo.com
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