- 23% of American retail investors consider ESG factors when investing, down from 28% in 2022.
- Almost half (49%) of investors do not consider ESG when investing, with 10% of this group having previously considered it and have since turned their backs on it.
- Main reasons for ditching ESG include a focus on strong returns (36%), too much greenwashing (25%), and confusion over the labels (21%).
- American investors ages 35-44 are most likely to consider ESG factors (34%), followed by investors ages 18-34 (29%).
July 24, 2024 – American retail investors are significantly more likely to ignore ESG (environmental, social & governance) factors than consider them when investing, according to data from the latest Retail Investor Beat (RIB) from trading and investing platform eToro. In a study of 1,000 American retail investors, just 23% stated they always consider ESG before investing in an asset, dropping from 28% in 2022. More than double this number (49%) said the opposite, with 10% of this camp stating they are now neglecting ESG after previously prioritizing it. A further 17% said that they only think about ESG when their investments are performing well.
ESG investing has taken a credibility hit in recent years amid accusations of greenwashing and mislabelling of ESG funds. According to the latest RIB, this has taken its toll on the mindset of many retail investors. When those who do not consider ESG when investing were asked why, 36% of investors stated their focus has shifted to seeking strong returns, followed by too much greenwashing (25%), and general confusion (21%).
Commenting on the data, eToro US Investment Analyst Bret Kenwell, says: “ESG is not a fad, but it’s clear that it’s not the top priority among most investors. We’re still in a relatively young bull market, one that hasn’t treated all stocks or sectors equally. Notably, the world’s largest ESG fund, the Parnassus Core Equity Fund, has lagged in the S&P 500 over the last year. With that in mind, many investors still have their guard up and it’s not surprising that they are prioritizing returns over other factors. Perhaps as the bull goes on, investors will start putting more emphasis on other factors.”
According to the data, older retail investors (aged 55+) are least likely to consider ESG, with only 16% of this cohort always factoring it into investing decisions versus 61% who do not. Elder Millennials (aged 35-44) were the group most likely to consider ESG factors (34%) followed by investors ages 18-34 (29%). However, this faction of younger investors also reported being the most confused by ESG than their older counterparts (53% vs. 40%).
Investors who do consider ESG were asked which letter they think is most important – E, S or G. Environmental factors came in ahead of the others, with 32% prioritizing ‘E’. This was followed by social (20%) and then governance factors (19%), while 29% say all are equally important. All age demographics ranked their priority in E-S-G order, except for investors ages 55+ who were over twice as likely to value governance (23%) over social factors (9%).
Bret Kenwell adds: “Unfortunately, labeling can be confusing and in the case of ESG, it’s impacting the credibility and trust of ESG, ultimately leading to increased confusion. Younger investors were most likely to consider ESG when investing, which makes it clear that topics such as climate change and labor rights are important factors to their values. However, at the same time, this group of younger investors was most likely to say they find ESG labeling too confusing.”
ENDS
Notes to editors
About this report
The latest Retail Investor Beat was based on a survey of 10,000 retail investors across 12 countries and 3 continents. The following countries had 1,000 respondents: UK, US, Germany, France, Australia, Italy and Spain. The following countries had 500 respondents: Netherlands, Denmark, Poland, Romania, and the Czech Republic.
The survey was conducted from May 15 – June 5 2024 and carried out by research company Opinium. Retail investors were defined as self-directed or advised and had to hold at least one investment product including shares, bonds, funds, investment ISAs or equivalent. They did not need to be eToro users.
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