Returns drive adoption of ESG and impact funds, finds Nuveen's Fifth Annual Responsible Investing Survey

Nuveen's annual study found for the first time that a majority of investors say better investment performance is their motivation for participating in responsible investing.

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Nuveen

Jun 17, 2020, 09:00 ET

NEW YORK, June 17, 2020 /PRNewswire/ -- High net worth investors are flocking to responsible investing vehicles to make a direct and measurable impact on the environment and society, but performance is the main driver for participation, according to Nuveen's Fifth Annual Responsible Investing Survey. The study, which surveyed over 1,000 high net worth investors and hundreds of financial advisors, dispels myths about the approach to investing which focuses on environmental, social and governance factors and companies' material impact on these important issues.

For the first time in the survey's history, a majority of investors (53%) cited better performance for prompting them to choose responsible investments, moving past the misconception that investing responsibly means sacrificing returns.

"The global pandemic and recent social unrest have further underscored the desire of many to make a difference. Investing with a responsible approach has become a preferred method to concretely address important issues, such as social justice, climate change and fairness in the workplace," said Amy O'Brien, Global Head of Responsible Investing at Nuveen. "Investors increasingly understand that promoting positive outcomes on important ESG issues, not only minimizes portfolio risks, it actually leads to improved performance overall."

Although making a positive impact on society is high priority for some investors (61%), performance continues to take the front seat for the majority of investment decisions. Nearly 9 out of 10 investors (85%) agree that they will only invest responsibly if the returns are the same or better. Additionally, 70% of advisors surveyed agree that better performance and superior risk management are the top reasons that drove high-net-worth clients to invest in RI, up from just 39% in 2018.

Advisors on board

Just as investors have come around to the performance benefits of RI, so too have advisors, as nearly one third (32%) report that their clients' portfolios with RI achieved above market-rate returns in the past year, compared to just 12% and 4% in 2018 and 2017 respectively. This is further validated by the increase in advisors (68%) who say that investors who incorporate RI in their portfolios typically outperform those without responsible investments – up significantly compared to 28% of those surveyed last year.

It is no surprise then that there are nearly twice as many advisors this year who say that they are very familiar with RI than reported last year, with 53% agreeing this year compared to just 27% a year prior and 18% back in 2015. In fact, 83% of investors surveyed agree that advisors who discuss responsible investing are more forward thinking. Taking cues from the rising investor interest, nearly two-thirds (65%) of advisors raise RI as a discussion point during their meetings or conversations compared to just 41% in 2017.

At the same time, it is no longer enough for advisors to simply be knowledgeable on responsible investing, as 56% of investors would prefer their advisors to be more active in helping them invest in ways that have a positive impact, compared to just 23% who expressed that view in 2015. Specifically, nearly three quarters (74%) of investors say it's absolutely essential for advisors to actively share news about emerging corporate scandals. Advisors have recognized this need, as 74% say that the majority of their high net worth clients would ask that they actively share this type of news with them, compared to just 48% a year ago.

And this communication is making an impact – half of investors (50%) have taken action regarding negative news about a specific company, including 23% that said they sold their investment in a company due to a company scandal or objectionable behavior. Overall, four in five advisors (80%) say they actively help their high net worth clients make a positive impact through their investments, compared to just 53% in 2015.

Corporate governance gains ground but knowledge gaps remain

Driving investors' desire to make a material impact is the current healthcare, environmental and political landscape. According to the survey, 51% of high net worth investors said recent natural disasters have made them more interested in RI, while 42% claimed the upcoming presidential election has spurred their interest.

While investors continue to most resonate with the E (28%) and S (20%) in E-S-G vs. the G (13%), this year's survey found that nearly two in five investors (39%) feel that the letters in E-S-G resonate equally with them. Even before the impact of the coronavirus pandemic, investors paid closed attention to the issues related to corporate governance, with 91% of investors agreeing that companies need to enact more policies that make them more accountable to shareholder concerns and 82% noting that companies with strong governance practices can reduce risk.

One finding that has not changed though is how investors view RI in an employer retirement plan. For example, 59% of respondents said they would choose an employer based on the availability of having a fully diversified RI option in their retirement plan. Since 2015, nearly three in four investors expressed that having the option to choose responsible investing in their retirement plan makes them feel good about working for their employer (71% in 2015, 79% in 2017 and 76% this year).

However, despite increased investor demand and value in ESG factors, advisors still face challenges when it comes to explaining and implementing RI with clients, even more so than in previous years. For example, 79% of advisors say they still find it challenging to help high net worth investors understand the true definition of RI, compared to 68% last year. In fact, despite RI's growing prevalence in the investing world, 58% of investors surveyed said they want to invest responsibly but do not know their options, virtually the same sentiment from 2015 (56%) - despite some fluctuations in the years between.

For an overview of this year's survey findings, please visit Fifth Annual Responsible Investing Survey.

More information about how Nuveen integrates responsible investing as a means to help clients optimize returns and manage risks can be found here.

Methodology

Nuveen's Fifth Annual Responsible Investing Survey is a trended analysis of key issues facing advisors and investors. Nuveen commissioned The Harris Poll to conduct surveys of both populations, enabling the study to identify gaps between the perceptions of investors and those of advisors. The advisors' survey was conducted online from December 9, 2019 – January 7, 2020 among 310 currently employed financial advisors in the U.S. (one-third wire house, one-third RIAs, one-third broker/ dealer affiliated). Advisor data did not require any statistical weighting in order to reflect the advisor universe. The affluent investor survey was conducted online from December 9 – 26, 2019 among 1,007 affluent investors: U.S. residents over age 21 with $100,000 in investable assets, excluding workplace defined contribution accounts and real estate, who consider themselves the decision maker for financial decisions and work with a financial advisor. Investor results were statistically weighted by various demographics where necessary to align them with their actual proportions in the population. The data was also adjusted to reflect respondents' propensity to be online.

About Nuveen

Nuveen, the investment manager of TIAA, offers a comprehensive range of outcome-focused investment solutions designed to secure the long-term financial goals of institutional and individual investors. Nuveen has $1 trillion in assets under management as of 31 March 2020 and operations in 27 countries. Its investment specialists offer deep expertise across a comprehensive range of traditional and alternative investments through a wide array of vehicles and customized strategies. For more information, please visit www.nuveen.com.

Contact:
Mary Ellen Higgins
Nuveen Media Relations
781.789.1911
[email protected]

E-Soo Kim
Nuveen Media Relations
212.207.2012
[email protected]

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SOURCE Nuveen