Schroders’ Global Investor Study Finds that US Investors’ Ambitions Fail to Reflect Their Actions within Sustainable Investments
According to the annual Global Investor Study conducted by Schroders, global asset manager with $565.5 billion in assets under management, American investors are positive on sustainable investing and believe it makes a difference, but aren’t necessarily incorporating it into the investment decisions.
The study, which surveyed over 1,500 U.S. investors and over 25,000 investors globally, found that six in ten Americans agree that all investment funds should consider sustainability factors (61 percent) or believe they can contribute to a more sustainable world by choosing sustainable investment products (62 percent). However, their actions don’t necessarily reflect these beliefs:
- Only 15 percent say they actually invest in sustainable themed investments, and 31 percent say they are interested and want to invest.
- Just over half (51 percent) say they always consider sustainability factors when selecting investment products, less than the global average of 57 percent. Asian investors (66 percent) were more focused on these factors, with the vast majority in India (87 percent), China (80 percent), Thailand (77 percent) and Indonesia (76 percent) saying they always consider sustainability when investing.
- Investing sustainably also did not rank highly in terms of overall financial priorities. US investors instead cited the need to avoid losing money (34 percent), meeting total return (income & growth) expectations (32 percent), generating their expected level of income (30 percent) and reasonable fees (25 percent) as more important factors, with only 23 percent ranking investing sustainably in their top two most important investing factors.
When it comes to sustainable investing, Americans are split on the most important approaches: 40 percent chose a responsible approach - investing in companies because they are best in class when it comes to ESG issues; and 40 percent chose an integrated approach - investing in companies that are likely to be more profitable because they are proactive in preparing for environmental and social changes.
Jessica Ground, Global Head of Stewardship, Schroders, commented:
“There remains a gulf between people’s sustainable investment aspirations and the reality of how they prioritize these factors in their investment decision-making. A significant proportion of investors clearly believe that sustainable investing is important, but this has yet to translate into tangible action for the majority.
“This will unfortunately leave investors vulnerable to the global impacts caused by the issues such as climate change. It is important that asset managers and the broader industry – including the likes of policymakers globally – work with investors to ensure they can better identify the benefits of investing sustainably and, in turn, are able to access funds which will enable them to do so.”
Climate change
Climate change has been an issue and challenge that Schroders has sought to combat through the sustainable tools it has created, including:
- Physical risks framework: Quantifies the physical impact climate change has on companies and sectors around the world. The team identified oil & gas, utilities and basic resources as the sectors most exposed to the physical impact of climate change. The potential cost of insuring their physical assets equates to more than 3 percent of their market values.
- Climate Progress Dashboard: Compares projections made by international organizations to estimate the temperature change implied by the current progress toward goals set out in the Paris Agreement.
- SustainEx: Quantifies social and environmental impacts across individual companies, industries and geographies. It is the first framework that attempts to translate social and environmental impacts into financial costs or benefits. Through this platform, investment teams have access to a systematic and quantitative measure of sustainability risk that can be applied across investment strategies.
The study found 55 percent of American investors believe that climate change will have some, or a significant, impact on their investments, lower than global investors at 63 percent. Thirty nine percent of American investors think there will be little to no impact.
Globally. almost three-quarters of investors (71 percent) believe man-made climate change is a real phenomenon that is impacting the world, including 40 percent who believe this impact will be ‘significant’. At a country level, the highest number of doubters were American investors, with 7 percent saying they believe man-made climate change is not a real phenomenon.
When it comes to the UN Sustainable Development Goals, the goal that Americans think is most important was that of “Prosperity,” defined as ensuring “that everyone can enjoy prosperous and fulfilling lives and that economic, social and technological progress occurs in harmony with nature”. This differs slightly from the rest of the world, which views the most important as “Planet”, defined as “protecting the planet from degradation, including through sustainable consumption and production, sustainably managing natural resources and taking urgent action on climate change”.
*In April 2019, Schroders commissioned Research Plus Ltd to conduct an independent online survey of 25,743 people who invest from 32 locations around the globe. These included Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, the Netherlands, Spain, the UK and the US. This research defines “investors” as those who will be investing at least €10,000 (or the equivalent) in the next 12 months and who have made changes to their investments within the last 10 years.
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The views and opinions contained herein are those of Schroders' investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.'s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.