socially responsible investing349ab54c3b58919c6638-ff70f51d4942f2bbd11ba0e41cfec577.r51.c… ·...

A Spectrem Group White Paper

Socially Responsible Investing

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This report provides a summary of respondents’ views of new investment opportunities to assist financial institutions in developing these products as well as assisting existing financial advisors in retaining and growing their businesses. Those who participated had between $100K and $25MM net worth, not including primary residence (NIPR).

The surveys were completed by the person primarily responsible for making the day–to–day financial decisions within the household. In total 3,070 persons responded to the survey.

Spectrem conducted this survey through an online panel that is generally representative of the affluent investors throughout the United States. However, some age–based weighting of the data was performed to insure a more representative sample.

Net Worth, NIPR, includes all assets except primary residence, less all liabilities. We examine three distinct segments:

• Mass Affluent - $100,000 - $999,999 (1,266)• Millionaire - $1,000,000 - $4,999,999 (1,264) • Ultra High Net Worth (UHNW) - $5,000,000 - $25,000,000 (540)

Five age segments are compared throughout the report:

• ≤ 35 (92)• 36 - 44 (146)• 45–54 (362)• 55–64 (1,275)• 65 and above (1,196)

Comparisons of male and females are also included in the report:

• Males (1,943)• Females (1,127)

© 2016 Spectrem Group



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Socially responsible investing is the practice of investing in products and services which show or promise a corporation has a desire to have a positive impact on environmental, social and human rights issues. Investing in companies with socially responsible profiles serves to make the investor feel good about what they are doing with their investable funds, and ostensibly encourages corporations to promote their own efforts in socially responsible efforts.

Socially responsible investing is becoming increasingly popular, although it

remains mostly a purview of younger investors and those with lower net worth.

There are definitely investors who have no interest in socially responsible investing, but advisors need to be prepared to discuss such investments with those investors who want their money to have an impact on the environment or significant social issues.




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Socially responsible investing remains a mystery to some investors. Placing their familiarity with socially responsible Investing on a 0-to-100 scale, familiarity came up at 46.75. Investors in the 36-44 age group had the highest rating for their familiarity at 49.17, and the oldest investors (65 and over) listed their familiarity at 46.61.


Very familiarNot at all familiar

Familiarity With Investment Terms (On a Scale of 0 to 100)

35.76

47.42

43.12

35.18

49.17

39.32

31.17

47.74

32.92

28.30

46.27

31.66

27.67

46.61

29.33

Impact Investing Socially Responsible Investing Microfinance

≤ 35 36-44 45-54 55-64 ≥ 65

28.94 46.75

Socially Responsible InvestingImpact Investing

Microfinance

By Age

31.61



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Familiarity with socially responsible investing rises as wealth rises. Among Ultra High Net Worth investors with a net worth between $5 million and $25 million, familiarity was at 55.11. Familiarity among Mass Affluent investors with a net worth between $100,000 and $1 million was at 42.24.

25.66

42.24

26.1329.14

47.69

32.8036.20

55.11

41.64


$100K - $999K $1MM - $4.9MM $5MM - $25MM

By Wealth

At the same time, investors under the age of 36 place the significance of socially responsible investing at 51.68 on a 100-point scale, well over the 36 rating which came from investors over the age of 64.

Male investors report a greater familiarity with socially responsible investing than women, 49.27 to 42.37.

31.22

49.27

33.64

25.02

42.37

28.11


Male Female

By Gender

Wealth and age are predictors of knowledge about socially responsible investments.



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Younger investors have a significant portion of their investment portfolio pointed at socially responsible investments. Twenty-seven percent of investors under the age of 36 have at least 25 percent of their portfolio directed at socially responsible firms or products. Among investors over 54, 83 percent have less than 25 percent of their portfolio placed in socially responsible investments.

47%

36%

12%4% 1% 1%

0% 1%-24% 25%-49% 50%-74% 75%-99% 100%

Percentage of Portfolio in Socially Responsible Investments

39%

33%

18%

7%

2%

0%

42%

35%

17%

5%

1%

1%

48%

33%

14%

4%

1%

0%

49%

34%

10%

5%

1%

1%

44%

39%

11%

4%

1%

1%

0%

1% - 24%

25% - 49%

50% - 74%

75% - 99%

100% ≤ 35 36-44 45-54 55-64 ≥ 65

By Age



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Investors with a smaller net worth have a greater percentage of their portfolio aimed at socially responsible investments. Among Mass Affluent investors, 20 percent have at least 25 percent of their portfolio in socially responsible investments. Among Ultra High Net Worth investors, only 14 have that percentage of their portfolio aimed at socially responsible firms or products.


By Gender

Percentage of Portfolio in Socially Responsible Investments

48% 45%48% 48%

44%

33% 38%37% 36%

35%

12%12%

10%10%

14%

5% 4% 3% 4% 5%2% 1%

1%1% 2%

1% 1% 1%

$100K - $999K $1MM - $4.9MM $5MM - $25MM Male Female

0% 1% - 24% 25% - 49% 50% - 74% 75% - 99% 100%

By Wealth



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There are several motivations that would cause an investor to want to place their investments in the hands of companies that are socially responsible. Chief among them is to create a better world for their offspring (62 percent). Fifty-seven percent point to a desire to improve the environment (more true among older investors).

62% 46% 48%

57% 41% 7%

Create a better world for children and grandchildren

Investing in these companies will cause other companies to embrace social responsibility in their business practices

Socially responsible investing will create a better world for the less fortunate

Socially responsible investing will help improve the environment

Socially responsible investing will penalize and send a message to those companies that create products that are harmful to people

Other/None of the Above

Main Interest for Socially Responsible Investing



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Obviously, a majority of investors do not consider socially responsible investing, and they also have several reasons for avoiding that target for investments. A majority say their investments are purely aimed at making a profit and their considerations are entirely financial (moreso males than females).

57% 32% 10%

20% 35% 6%

My investment objectives are purely financial

I feel most companies claiming “social responsibility” in their corporate behavior is nothing more than public relations.

I believe social responsibility is not a corporate responsibility

I believe corporations should do all they can to generate a profit and let individuals use their investment returns for providing social change

I’ve never given much thought to social responsibility in my investing

Other/None of the Above

Reasons for Lack of Interest in Social Responsibility



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54%

28%

9%14%

39%

7%

57%

32%

9%

21%

34%

5%

65%

39%

14%

31% 30%

8%

$100K - $999K $1MM - $4.9MM $5MM - $25MM

61%

35%

19%11%

35%

13%

63%

34%

10% 12%

28%

9%

57%

33%

10%14%

28%

7%

55%

30%

8%

19%

37%

6%

59%

33%

11%

24%

35%

7%

My investmentobjectives are purely

financial

I feel most companies claiming “social

responsibility” in their corporate behavior is

nothing more than public relations

I believe socialresponsibility is not a

corporateresponsibility

I believe corporationsshould do all they can

to generate a profitand let individuals use

their investmentreturns for providing

social change

I’ve never given much thought to social

responsibility in my investing

Other/None of theabove

≤ 35 36-44 45-54 55-64 ≥ 65

Reasons for Lack of Interest in Social Responsibility

63%

33%

11%

23%31%

6%

44%

29%

8%13%

45%

8%

Male Female

By Age

By Wealth

By Gender

More than one-third admit they have given no thought to socially responsible investing (and that is especially true among female investors).



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The problem with socially responsible investing is wondering whether it is a more profitable or equally profitable way to invest funds. Just over half of investors

believe socially responsible investing will provide similar returns to investing without that focus, while 43 percent believe it will provide lower returns than the overall stock market. Only 6 percent perceive socially responsible investing as providing a greater return than the stock market.

Less Return than Overall Stock Market

Same Return as Overall Stock Market)

Greater Return than Overall Stock Market)

Feel Socially Responsible Investments Result in a Greater Return, Same As, or Less Return

21%32% 38% 40%

49%37% 44%

52% 47%34%

63%54%

52% 54%47%

55%51%

44% 48%58%

16% 14% 10% 6% 4% 8% 5% 4% 5% 8%

≤ 35 36-44 45-54 55-64 ≥ 65 $100K -$999K

$1MM -$4.9MM

$5MM -$25MM

Male Female

Less Return than Overall Stock Market

Same Return as Overall Stock Market

Greater Return than Overall Stock Market

By Age By Wealth By Gender



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Sure, you want your investable funds to make a positive social and environmental impact, but are you willing to pay for that to happen? Only 3 percent say yes, they would pay more for a socially responsible investment. Twenty-two percent would pay much less than normal for socially responsible investments. Younger investors are more likely to pay more for social responsibility.

10%

79%

10%8%

73%

19%

3%

74%

22%

4%

78%

18%

2%

71%

27%

Much more than the price of otherinvestments

Same price as other investments Much less than the price of otherinvestments

≤ 35 36-44 45-54 55-64 ≥ 65

3%

75%

22%

Much more than the price of other investments

Same price as other investments

Much less than the price of other investments

How Much Would You be Willing to Pay for Socially Responsible Investments?

By Age



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In some cases, it’s not about investing in firms that are doing good work, it is not investing in firms that are harmful to the consuming public in some manner. Placing their investment plans on a 0-to-100 scale, investors placed their decision to avoid companies with a bad human rights record at 70.06. Investing with an eye toward companies with a good environmental record, or avoiding those with a bad environmental record, came in at 68.79.

Interest in Investing in the Following Types of Socially Responsible Investments (0=No Interest, 100=Great Interest)

By Age

56.82

68.79

67.24

70.06

Companies that encourage and promote diversity andhave specific programs in place that create a diverse

workforce

Companies that encourage and foster environmentallyfriendly practices and avoiding those companies that

harm and damage the environment

Avoiding those companies that produce or solicitproducts that are harmful to the consuming public,

either physically, socially

Avoiding companies whose practices hamper humanrights such as companies that don't have adequate pay

51.14

63.88

63.32

65.20

56.02

66.40

61.11

66.39

56.05

67.78

66.54

69.08

57.48

69.93

68.08

71.17

57.08

68.74

68.02

70.25

Companies that encourage and promote diversity andhave specific programs in place that create a diverse

workforce

Companies that encourage and foster environmentallyfriendly practices and avoiding those companies that harm

and damage the environment

Avoiding those companies that produce or solicit productsthat are harmful to the consuming public, either

physically, socially

Avoiding companies whose practices hamper humanrights such as companies that don't have adequate pay

≤ 35 36-44 45-54 55-64 ≥ 65



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Interest in socially responsible investing seems to be growing. Nineteen

percent of investors say they have more interest in the topic than in the past, while 13 percent say their interest level has dropped. Thirty percent of investors under the age of 36 have a greater interest than in the past.

Interest in Socially Responsible Investments

19%

69%

13%

More interest than in the past

Same amount of interest as in the past

Less interest than in the past

30%

65%

5%

23%

70%

7%

16%

75%

10%

20%

68%

12%

17%

67%

16%

More interest than in the past

Same amount of interest as in the past

Less interest than in the past

≤ 35 36-44 45-54 55-64 ≥ 65



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So what kind of socially responsible investment do you want to make? Forty-four percent of investors

choose companies focusing on water conservation while 42 percent invest in companies promoting

good health and a vigorous lifestyle. Older investors have a greater interest in water conservation

and developing solar power.

44%

33%

36%

41%

42%

28%

Water conservation

Forest management

Developing wind as an energysource

Developing solar energy

Promoting exercise and goodhealth

None of the above

37%

33%

32%

38%

40%

26%

40%

33%

33%

39%

43%

29%

39%

32%

33%

38%

42%

30%

47%

34%

38%

44%

42%

26%

45%

31%

34%

40%

42%

30%

≤ 35 36-44 45-54 55-64 ≥ 65

Organizations or Charities Interested in



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Implications and Conclusions

The media message regarding social responsibility and global awareness becomes stronger each day and highlights the importance these issues will have to investors of the future. Investors face the delicate balance of wanting to be socially responsible but wanting to ensure their own future financial success. Advisors need to position themselves as the expert in helping investors help the world while still protecting the investor.

Advisory firms must consider the following:

Ask investors about their interest levels in socially responsible investments. In most cases, they may not have an interest. It might be useful, however, to point out different types of socially responsible investments and highlight how some may not really seem to be socially responsible at the outset. For example, is Tesla a socially responsible investment? Is it a good investment for them? Or Tom’s, the shoe company? Would this fit in their portfolio? Or companies that are exploring water technologies? Make sure that they understand that socially responsible investing is not the same as a charitable donation.

Be familiar with different types of socially responsible investments. As highlighted in this report, investments in water or fitness or human rights are of interest to many investors. To the extent that you are aware of the initiatives various companies may have in these areas, you may be able to interest them in different stocks or other investments.

Familiarity with socially responsible companies may allow you to develop a relationship with the children of your existing clients. In many cases, investors don’t really know how to find out about socially responsible investments. The expertise you have in this area may allow you to open up a dialogue with the children of your clients. Generally, younger investors are more interested in these investments.

Discuss the difference between microfinance, impact investing and social responsibility with your customers. Many investors are more likely to find impact investing or micro-finance more appealing than socially responsible investing. Spectrem research indicates that most investors attribute their own success to “Hard Work”. To the extent they believe their funds are assisting someone willing to work hard, they may be more willing to risk their own assets. The traditional concept of social responsibility for older investors often tends to be the “sin-free” investments that they believe are not generally profitable.

As millennials continue to increase their own affluence and as Baby Boomers begin to feel comfortable with their own retirement plans, social responsibility will become increasingly important. Corporations will generally start to be held to higher standards and investors and the media will become increasingly aware of the practices of these companies. Advisors must be articulate about various issues and help investors of the future weigh the benefits of social investing against pure profit.



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