Kiplinger – Domini Poll: ESG Investing Is Gaining Traction

A significant majority of investors say a company’s commitment to ESG principles is important to them when choosing investments, according to a new national poll conducted by Kiplinger in partnership with money management firm Domini Impact Investments. More than 70% of respondents say a company’s environmental practices, social issues management and governance policies are very or somewhat important to them when choosing investments.

Four in 10 respondents say they have purchased stocks or bonds in the past based on environmental, social or governance issues. Among millennials, the number jumps to nearly two-thirds. Almost eight in 10 (78%) say they are very or somewhat likely to add an ESG investment to their portfolio over the next one to two years. Their reasons vary: More than one-third want to make a positive impact on the environment. About one-fourth want to build a better future for all. Some 15% want to invest in their local community.

Recent headlines may be spurring some of this increased interest: More than half (52%) say they are more likely to put money in ESG investments because of news of environmental or climate change concerns; more than one-third (35%) were more likely to do so because of media reports of social unrest; nearly one-third (32%) were also more likely to make an ESG investment because of the pandemic.

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Overall, more than half of respondents would be willing to sacrifice some performance on their investments to achieve an ESG goal. Breaking it down by generation, 75% of millennial investors, 51% of Gen X investors and 35% of baby boomer investors would be willing to sacrifice some level of return.

One-fourth of investors say ESG investing is simply a way to diversify their holdings and reduce market risk. Only 13% believe that ESG investments will deliver better returns than non-ESG investments. Respondents cited lower returns, lack of information and higher fees as concerns about ESG investing. Men were more likely to be concerned about lower ESG returns than women (43% versus 27%). More men also cited concerns about higher fees than women (27% versus 19%).

Almost half of respondents (49%) say that when it comes to ESG investing, they prefer mutual funds that hold a diversified portfolio of stocks with better environmental or social attributes. An even larger percentage of baby boomers (58%) say this is their preferred strategy. Here are the highlights from the survey:

When choosing an investment, how important are the following factors to you?

Environmental practices

such as climate change, renewable energy

and sustainability

• Somewhat important: 38%
• Very important: 34%

Social issues

such as diversity, labor relations and

conflict minerals

• Somewhat important: 41%
• Very important: 28%

Governance policies

such as management structure, board

independence and executive compensation

• Somewhat important: 44%
• Very important: 31%

Have you invested in stocks or bonds because of environmental, social or governance issues?

• No: 53%
• Yes: 41%
• Not sure: 6%

Do you currently own shares in an ESG-focused fund (either stocks or bonds)?

• Yes: 29%
• No: 42%
• Not sure: 29%

How likely are you to add ESG investments to your portfolio over the next one to two years?

• Very likely: 35%
• Not likely: 22%
• Somewhat likely: 43%

Which of these objectives BEST summarizes the ESG value you care most about?*

• Encourage clean energy to help mitigate climate change: 19%
• Avoid depletion of natural resources and protect our ecosystems: 18%
• Improve business ethics and transparency: 13%
• Protect employee safety and treatment of workers: 13%
• Positively impact your community and/or underserved communities: 12%
• Do more to ensure equal opportunity for all: 11%
• Reduce poverty and promote human dignity around the world: 8%
• Increase how much companies donate to causes I care about: 5%
• Increase the number of women and people of color in corporate leadership: 3%

Which of these statements BEST reflects your beliefs (or expectations) for the role of ESG investing in your portfolio?

• It’s another way to diversify my holdings and reduce market risk: 25%
• I want my investments to reflect my values: 21%
• It will perform no better or worse than non-ESG investments: 17%
• I don’t see any benefit to ESG investing: 16%
• It delivers better returns than non-ESG investments: 13%
• It delivers less growth, but I am willing to sacrifice returns in exchange for building a better future for all: 7%
• Other: 1%

Are there any factors keeping you from making a greater investment in ESG stocks, bonds or funds?†

• Concern about weak performance: 35%
• Lack of readily available information to help select ESG stocks, bonds and funds: 25%
• Possibility of false claims about preserving the environment: 24%
• Concern that ESG funds have higher fees: 23%
• Not sure how to get started with ESG investing: 21%
• No concerns: 16%
• Not interested in ESG investing: 12%

If you were to make an impact investment, which of these would be most important to you?

• To make a positive impact on the environment: 35%
• To build a better future for all: 24%
• To invest in my local community: 15%
• To NOT invest in certain areas (for example, weapons, fossil fuels or for-profit prisons): 12%
• To create more diversity at the executive level and in the workplace: 8%
• To help advance social justice: 6%

When it comes to ESG-focused investing, which one of the following approaches would you prefer?*

• Investing in mutual funds with a diversified portfolio of stocks with better environmental and/or social attributes: 49%
• Investing in a mix of stocks and private investments: 25%
• Investing directly in private businesses with a focus on ESG: 12%
• No preference: 15%

Methodology

The survey included 1,029 respondents, age 25 and older, with a minimum of $10,000 in investable assets (excluding retirement accounts). It was conducted August 4 to 10. A survey quota was implemented around familiarity with the term “ESG investing” to ensure that about half of the respondents were familiar with the term prior to taking the survey. The median age of survey participants is 51. Half are male and half are female. Median estimated household income before taxes in 2021: $141,788. Median current value of investment portfolio, excluding retirement accounts: $193,701. Median combined net worth of household, excluding primary residence: $436,449.

*Percentages do not add up to 100% due to rounding.

†Respondents were asked to select all that apply.