Investors willing to sacrifice returns for ESG goals

More than half of investors are interested in ESG funds, and a significant portion of them say improving the world is just as important as financial returns.

That’s according to results of a report published today by Betterment, Retail Investors and ESG: Assessing the Landscape, which in April surveyed 1,000 people in the U.S. who have investments beyond a 401(k) account.

Fifty-five percent of respondents who didn’t have ESG investments in their portfolios said they were interested in having them or had previously sought them out, and 11% were unsure, according to Betterment. More than a quarter, 26%, said they currently hold an ESG-themed investment.

Questions about returns showed a complex picture of investors’ expectations. Fifty-eight percent of ESG investors said they were at least somewhat willing to sacrifice returns in order to achieve ESG goals. Separately, 46% said returns and ESG goals are equally important, while 17% said ESG goals are more important and 37% said financial returns should have priority.

Among people who are hesitant to invest in ESG options, 53% cited concerns that doing so would result in lower returns. Meanwhile, 40% said they were worried that the impact of those investments would be less than expected, and 39% said higher fees were a concern, according to Betterment.

When it comes to sustainable investment options in 401(k) plans, responses were enthusiastic. Seventy-two percent said that they would be more likely to increase their contribution rate to their 401(k) if funds with a sustainability focus were available. That result is similar to findings over the past two years from surveys from Schroders, which found that nearly three-quarters of 401(k) participants would boost their contributions if their plans had ESG options.

In the recent Betterment survey, nearly all the respondents said environmental concerns are important, while 76% said they are “passionate about climate change or social justice”. All but 14% said that it’s important for their investments to reflect their personal values, the survey found.

Betterment also pointed to what it said is an opportunity for advisers to connect with clients. Fifty-eight percent of respondents in the survey said they work with an adviser. Only 6% of people said that offering ESG would make them less to hire an adviser, while 48% said it would make no difference. Conversely, 47% said that the opportunity to invest in ESG options would make them more likely to work with an adviser.