Socially responsible investing has really blossomed in the past few years. What used to be viewed as a niche investment philosophy is now firmly planted in the mainstream, with everyday consumers using their dollars to support companies that align with their personal values around sustainability and social progressiveness.
But beyond the day-to-day choices, like what stores to frequent and what products to purchase, consumers are turning to environmental, social and governance (ESG) standards to help inform their investment decisions. In a recent study* by Allianz Life, nearly 80% of people said they “love the idea of investing in companies that care about the same issues” they do, and 73% feel it’s a way to reward a company’s good behavior. On the flip side, 71% said they would stop investing in a company if it behaved in ways they consider unethical.
While a lot of the buzz around ESG tends to focus on the environmental aspect (think of all we have heard recently with climate change activism, the move toward renewable energy, eliminating single-use plastics, etc.), the Allianz Life study found that people care just as much about social and governance issues.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
When asked about the importance of a variety of ESG topics in making a decision to invest in a company, 73% cited environmental concerns like natural resource conservation or a company’s carbon footprint/impact on climate change as important factors. But the exact same percentage emphasized social issues, such as working conditions or racial or gender equality, and a similar amount (69%) noted governance topics, such as transparency of business practices and finances or level of executive compensation, as influential elements in their decision of whether to invest in a company.
Walking the Walk
While people say they care about all these issues, when it comes to investing, are they actually walking the walk? The short answer is no. After all, it’s easier to say something than to commit to doing it — especially when it comes to money.
For example, 84% of people in the study said that a company’s ability to provide safe working conditions for its employees was important in their decision to invest, but only 42% said they have actually taken action and chosen to invest or not invest based on that business practice.
The barriers to actually taking that next step and putting their money where their mouth certainly vary. Some may face challenges doing research and actually finding out more about ESG factors, with over three-quarters of Americans (76%) saying they don’t know how to evaluate if the companies included in an ESG investment are good corporate citizens or not. Over half say they think it would be difficult to find information on issues like the transparency of a business’s practices, its record on racial equality and the working conditions of their employees. Others cite a lack of uniform standards on how a company qualifies for ESG investing.
However, as the demand for ESG increases, companies may respond by increasing their transparency efforts or increasing communications on corporate social responsibility efforts.
Here to Stay
When it comes to socially responsible investing, some discrepancies still exist, and while not everyone is on board the ESG train, we can expect that the focus on ESG investing is here to stay. Over half of people who do not currently have money in ESG investments say they would be interested in having at least some money in them.
Consumers are attracted to ESG investing, not only for the social reasons and a desire to encourage companies to “do good,” but due to the belief that ESG investing is a smart financial choice — particularly over the long term. Nearly three-quarters of people believe an ESG investment strategy is not only one that you can feel good about, but one that makes long-term financial sense.
This is another aspect of ESG investing — the idea that companies with strong ESG practices generally are more sustainable and align with longer-term investing. Those looking to start investing in ESG should work with their financial professional to identify investments that can create a positive impact on their overall portfolio.
How Investors and Consumers Can Get Involved
Consumer focus on ESG investing and supporting companies that do good is on the rise, and forward-thinking companies are taking note. Everyday investors looking to join the ranks of impact investors have an increasing number of resources available to learn more about these initiatives and take the next step, such as the United Nations Sustainable Development Goals Knowledge Platform or the Principles for Responsible Investment.
People also can start by speaking to their financial professional and expressing their interest in ESG investing. Discuss goals and what issues might be most important — whether they fall into the environmental, social or governance bucket, or some combination — and together create an ESG strategy that makes sense for their specific financial situation.
As demand grows, more companies will feel the pressure to accommodate consumer demand and keep shareholders happy. Consumers can keep pace by doing good with their investments, which in turn can help society, the planet and their investment portfolio.
*Allianz Life Insurance Company of North America conducted an online survey, the Allianz Life ESG Investor Sentiment Study, in December 2018 with a nationally representative sample of 1,000 respondents ages 18 years or older.
-
The Most Popular Apps for Retirement Planning in 2025A J.D. Power survey ranks retirement planning apps based on customer service and satisfaction. Does your financial app make the cut?
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary FormsStandard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary Forms
Standard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
This Is How Life Insurance Can Fund Your Dreams NowBeyond a death benefit, life insurance can provide significant financial value and flexibility through 'living benefits' while you are still alive, helping with expenses like education, business ventures or retirement.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on RetirementWhile some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.
-
One Small Step for Your Money, One Giant Leap for RetirementSaving enough for retirement can sound as daunting as walking on the moon. But what would your future look like if you took one small step toward it this year?
-
This Is What You Really Need to Know About Medicare, From a Financial ExpertHealth care costs are a significant retirement expense, and Medicare offers essential but complex coverage that requires careful planning. Here's how to navigate Medicare's various parts, enrollment periods and income-based costs.
-
I'm a Financial Planner: Could Partial Retirement Be the Right Move for You?Many Americans close to retirement are questioning whether they should take the full leap into retirement or continue to work part-time.
-
From Mortgages to Taxes to Estates: How to Prepare for Falling Interest RatesAs speculation grows that the Federal Reserve will soon start lowering interest rates, now is a good time to review your financial plans for housing, estate, taxes, investing and retirement to make the most of potential changes.
-
This Is How Lottery Winners Build Lasting Legacies, From a Financial ProfessionalWinning a massive lottery jackpot, like the recent $1.4 billion Powerball, requires seeking immediate legal and financial counsel, protecting your identity and winnings and planning your legacy.
