Most Investors are Unfamiliar with “Social Investments”

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A major new research study released today from Newton Investment Management, a BNY Mellon Investment Management firm, revealed that more than half (55%) of American investors are unfamiliar with the concept of “Social Investment,” defined here as the collective term for investments that seek to achieve some combination of economic, social, and environmental goals (ESG, responsible investing, etc.).

“The study results make us ask why social investment isn’t more widely understood and why it’s not been more widely adopted in the U.S.,” said Julian Lyne, Chief Commercial Officer of Newton Investment Management. “One explanation is that investor interests need to be better matched with social investment options that make sense to investors. This study makes a strong case for the importance of asset managers with expertise in the space helping connect the dots for investors between social interests and investment outcomes they’re looking for.”

Newton’s Social Investment research study, created by Oxford Risk and fielded by Research Now, surveyed nationally a statistically relevant group of 1,023 individual investors age 18 or older with at least $40,000 in investible assets. The study examined individual investors’ attitudes and behaviors toward social investment, what drives investor interest, investor goals, and reasons that prevent individuals from social investment.

The research dives deeper into the motivational and attitudinal factors that individuals differ on, as well as the obstacles that stop them from investing and the steps that could be taken to engage investors based on their past experiences with social investment. While the study found that in general demographic variables are not strong predictors of interest in social investment, age and household savings proved significant factors. For example, the study demonstrated a significant divergence between millennials and Baby Boomers, with 69% of adults 39 or younger showing interest in social investment compared with just 21% of older Americans over the age of 50. Likewise, households with greater cash savings balances also diverged, with nearly half (49%) of households with savings between $500K$1.5M showing interest in social investing compared with just 38% of households with savings of less than $499K.

The study derived six “Social Investment Profiles” that indicate characteristics of different representative groups of the investing population, highlighting the barriers and opportunities most relevant to each type of individual (full Social Investment Profiles linked here). For example, contrasts exist between investors who are prepared to trade off liquidity or risk for social outcomes and those who are not, suggesting that a broad-brush approach to social investment does not work.

“This research offers valuable, measurable insight on investor attitudes towards all types of responsible, social investment, which is an area that Newton has pioneered over the last 40 years,” said Lyne. “The findings highlight the importance of a tailored approach to educating and helping connect the dots for investors between social interests and the investment outcomes they’re looking for.”

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