ESG investors say ‘better performance’ is key to participating in ESG investing

Investors focused on environmental, social and governance (ESG) factors said that seeing the benefits of their investing at work is essential to their participation, according to a new survey released by Nuveen, a $1.2 trillion global investment manager of TIAA.

The sixth annual responsible investing survey which was conducted among 1,007 investors, including 332 who said they are currently engaged in ESG investing, found that concerns about recent natural disasters and societal issues is also driving increased interest in ESG investing.

According to the survey, 55% of ESG investors cited better performance as their most important reason for participating in ESG investing, while 91% of ESG investors agreed that seeing the specific societal or environmental benefits of their ESG investing is essential.

About half (53%) of ESG investors also said it is hard for them to see those results, and 95% of those investors said they would invest even more if it were easier. However, among ESG investors who said that seeing the results is not hard, 94% agreed that it makes them want to invest even more toward ESG.

Amy O’Brien, global head of responsible investing at Nuveen, said: "The ESG marketplace is increasingly sophisticated, and investors recognize it is no longer enough for a company to simply claim they are committed to ESG principles.”

"We believe ESG investors are telling us that when they invest in a company that says it is ESG-focused, they want to see tangible evidence of that commitment in how the company runs its operations and behaves toward its key stakeholders. Indeed, authentic dedication to ESG management is a criterion that we now are applying across our entire investing platform,” added O’Brien.

According to the Nuveen survey, significantly more investors who are aware of ESG investment are currently participating in it, at 53%, compared to 44% in 2019 and 2018 respectively.

The findings also showed there is room for investors to get involved with the sector, with 23% of all investors having never heard of it, and 20% saying they have heard of it but are not familiar with it.

Nuveen found that investment performance is also likely to help drive investor interest, with ESG portfolios recently delivering above-average returns to many investors. Among investors currently participating in ESG investing, 46% report above-average returns and 43% said their returns are about the same as market returns were in the past year.

"Evidence continues to grow and show that investors are not sacrificing performance when they invest with concern for urgent societal and environmental factors," said O'Brien.

Net-zero carbon emissions strategies attracted the most interest from investors, as two-thirds (66%) of all investors stated that recent climate-related natural disasters have made them more interested in the sector.

For investors that are unfamiliar with ESG investing, an advisor’s recommendation would encourage them to participate, with nearly half of all investors gave "based on my advisor's suggestions/suggestions from my financial advisor" (50%) as reasons for participating in ESG investing.

"Our survey suggests that financial advisors are important 'gatekeepers' into the world of ESG investing and have a powerful role to play both in introducing investors to the sector and stimulating further market growth," added O'Brien.