US intermediaries failing clients on ESG

North American financial advisers are failing to educate clients on sustainability

The majority of financial advisers are failing to educate clients on ESG investing despite a growing number of Generation Xers and baby boomers showing an interest in the sector.

Allianz Life’s latest ESG Investor Sentiment Study found 30 per cent of Americans working with a financial professional had discussed ESG investing with their adviser, with the majority (69 per cent) saying they had initiated the conversation.

This is despite three-quarters of these respondents stating they have positive perceptions of ESG investing, while over half (51 per cent) said they would be interested in investing.

The study, conducted among 1,000 respondents in December 2018, also found that although millennials are more likely to make investment decisions based on ESG issues, Gen Xers and boomers are also putting their values into action.

Nearly two-thirds (64 per cent) of millennials said ESG factors are important in their investing decisions, with Gen Xers not far behind at 54 per cent and boomers at 42 per cent.

However, only 17 per cent of millennials are currently participating in ESG investing, compared with 7 per cent of Gen Xers and 3 per cent of boomers.

Despite the low numbers, nearly half of Gen Xers and boomers say they are interested in having some money in ESG investments at 49 per cent and 47 per cent, respectively.

All generations agreed social issues including diversity in the workforce and consumer protection are the most important factors when doing business with a company, followed by corporate governance issues and environmental topics.

The study also revealed millennials are more likely to be interested in learning about various types of ESG. However, all generations said they are unsure of how to evaluate if companies care about causes they support, with 71 per cent of millennials, 64 per cent of Gen Xers, and 69 per cent of boomers stating they wouldn’t know how to evaluate a firm’s ESG stance.

“Millennials get a lot of attention for driving ESG investing,” Todd Hedtke, CEO of Allianz Investment Management, said. “But when it comes to investing in and doing business with good corporate citizens, there is interest across the board and it’s only going to grow.”

Kelly LaVigne, vice president of consumer insights at Allianz Life, added: “These stats show people from all generations are looking to learn more about ESG and want to put their values into action. But they feel they need more education and guidance on how to best make ESG investment decisions.”