Funds focused on sustainable investing attracted strong inflows in 2019—in Europe, investor interest in sustainable funds has seen more than €35 billion in new net assets each year since 2016, reaching €120 billion in 2019 (a new record for European-domiciled funds), according to Morningstar data.
These numbers indicate that the interest in sustainable investing is not a passing trend. Rather, it’s becoming more mainstream, as investors from all demographic groups report interest in incorporating sustainability into their investment choices.
Morningstar’s behavioural research team found that people with at least moderate interest in sustainable investing spanned all generations and genders, though women and millennials had slightly higher rates of interest.
All investments have impacts on the environment and society, and investors increasingly want to know about these impacts and what they mean for their portfolio. First, investors want to know how these impacts align with their values. Second, investors increasingly want to consider long-term environmental, social, and governance (ESG) risks such as climate change when they make long-term investments.
However, investors do not fall into exclusive camps of being focused on either values or risk - many investors care about both aspects to varying degrees simultaneously.
Here’s what advisers need to know about ESG investing and why they need to take clients’ ESG preferences into account.