Here's What the Survey Says About ESG

There's no shortage of commentary, data, studies, surveys and the like pertaining to environmental, social and governance (ESG) investing.

That makes sense because purveyors of some of these studies are fund issuers or research firms hired by such companies. In other words, they have a vested interest in pushing ESG. Pessimistic as that view may be, the reality is cash continues pouring into ESG strategies, including exchange traded funds.

“ESG ETFs and ETPs listed globally gathered net inflows of US$7.55 billion during February, bringing year to date net inflows to US$17.35 Bn,” says ETF research provider ETFGI. “Year-to-date net inflows of $17.35 Bn are the second highest on record, after YTD net inflows in 2021 of $40.51 Bn.”

In other words there are some ESG surveys worth paying attention and that's good news for advisors because offerings and strategies in this space are proliferating at an exponential rate.

ESG Investing Meets Consumer Sentiment

In this case, we're not talking about the monthly consumer reading, but rather how consumers perceive ESG and apply it in their daily lives.

Those that doubt the veracity of this exercise should not because identification of consumer trends has long been a credible avenue for generating investment ideas. There are the old stories about Peter Lynch, the famed manager of the Fidelity Magellan Fund, sauntering through shopping malls on weekends in the 1990s with his daughters, finding investment idea through his kids' purchases and which stores were heavily trafficked.

With that in mind, ETF issuer Global X recently surveyed 579 U.S. consumers on ESG and sustainability topics.

“The purpose of the survey was to gauge consumer sentiment on the importance of environmental, social, and governance issues and how individuals integrate these sentiments into daily life,” says analyst Mayuranki De.

For advisors, the Global X survey is revealing in that it turns up data points that, albeit indirectly, underscore the likelihood that as the asset class expands and refines, more clients are going to want to talk about and gain exposure to ESG investing principles.

“Only 10% of survey respondents view consuming sustainably sourced products as unimportant,” notes De. “Over 40% of survey respondents firmly believe climate change negatively impacts people around the world, while 30% fully agree it affects themselves and their loved ones.”

Another data point indicates more investors, whether they realize it or not, are prioritizing stakeholder capitalism. For the uninitiated, that's capitalism that takes into account benefits to parties beyond shareholders.

“If asked to rank Business Ethics, Racial Discrimination, Human Rights, Gender/Sexual Discrimination, Diversity, and Climate Change/Sustainability in order of greatest to least significant, survey respondents overwhelmingly ranked Human Rights as number one,” adds De.

More Encouraging Signs for Advisors

Advisors have a lot on their plates and they know effective use of time is of the essence. In other words, it doesn't pay to discuss topics with clients that they're unlikely to be interested in.

Fortunately, the data indicate ESG and sustainability are topics clients are aware of and many need more education on this front, indicating this could be fertile territory for cultivating better relationships, particularly with younger clients.

“Only a fourth of U.S. consumers surveyed are aware of different investing verticals such as ESG, Thematic, or Socially Responsible Investing,” concludes Global X's De. “Of the nearly two-thirds of Americans surveyed who have some sort of investment, nearly half give thought to a company’s impact on climate change during the investment process while a majority said they care about the values of the companies in which they invest.”

Related: Evaluating Gender Lens Investing