Wells Fargo Investors Want More Information on Sustainable Investing

Nachrichtenquelle: Business Wire (engl.)
16.04.2020, 15:00  |  135   |   |   

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.

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