US investors snub ethical portfolio alignment

Millennials, aged 21 to 38, were most likely to embrace impact investing in both the US and UK

The number of US adults investing in companies that align with their values has dropped by over 10% – despite the appeal of impact investing growing, research reveals.

A study by global asset manager American Century Investments shows that while support for ESG and responsible investing is rising, only a third (32%) of US adults choose to do business with firms whose values and morals match their own – down 13% from the 2018 study.

For the third year, American Century surveyed 1,003 US adults (18 years or older) to gauge attitudes toward impact investing. The 2019 study also surveyed UK adults (1,004) for the first time.

It found only 24% of UK participants are investing in companies with similar values.

Despite this, over half of US and UK adults (56% and 59% respectively) stated impact investing is either “somewhat” or “very appealing.” For US respondents, this has increased from 49% in 2018 and 38% in 2016.

Millennials – those aged 21 to 38 – displayed the most interest in impact investing in both the US and UK, at 65% and 72% respectively.

While slightly lower, 55% of American Generation Xers (ages 39 to 54) said they find impact investing appealing compared to 64% of their UK counterparts.

However, appeal among baby boomers (ages 55 to 73) drops to 49% in the US and 46% in the UK.

According to the study, nearly two in five US millennials plan to invest within the next five years, compared to one in three UK millennials.

While return on investment, risks, fees and length of time are the top considerations when making investments, 64% of UK respondents said that impact on society is either “very or somewhat important, compared to 57% of US adults.

Healthcare and disease prevention topped the list of causes that matter the most to both sets of respondents, while environment and sustainability came a close second.

Other causes that made the list include improved education, mitigating poverty, gender equality, and alignment with religious principles.

“The findings of our study reaffirm that interest in impact investing continues to be on an upward trajectory across all age groups, but most importantly, it is encouraging to see that millennials are in the driver’s seat for impact investing,” Guillaume Mascotto, vice president, head of ESG and investment stewardship at American Century said.

“These trends are a significant signal to asset management firms that they will need to enhance their investment standards in an industry that will soon have to meet the expectations of more socially and environmentally responsible millennials,” Mascotto added.