The appeal of impact investing has reached all-time highs in the fifth impact investing survey by global asset manager American Century Investments.
Respondents were surveyed at the end of 2021 in the United States, United Kingdom, Germany and Australia. Responses reflected rising interest in impact investing compared to results going back to 2016 in the U.S, to 2019 for the UK and 2020 for Germany. Australia was new to the 2021 survey.
“We see a rising demand for impact investing across geography, generation and gender, along with favourable economics and a supportive political and regulatory environment that will drive changes and advances in sustainable investing over the coming year,” says Sarah Bratton Hughes, senior vice president and head of ESG and sustainable investing for American Century Investments.
The appeal of impact investing has grown in the UK more than any other country surveyed as a result of the COVID-19 driven global economic downturn, rising to 63 per cent (more than three-in-five), up from 48 per cent in 2020. In the United States, 61 per cent of respondents found impact investing appealing, up from 51 per cent in 2020, while the appeal in Germany increased from 35 per cent in 2020 to 44 per cent in 2021.
While the majority of respondents across geographies found impact investing appealing, the highest interest was registered among millennials (67 per cent) in the UK, U.S. (66 per cent) and Australia (68 per cent). Nearly as many Gen Xers in the UK (62 per cent), U.S. (64 per cent) and Australia (60 per cent) found the concept appealing. While baby boomers generally found impact investing less appealing than the overall population, their interest increased year over year in each country surveyed again. The appeal of impact investing increased 10 points to 55 per cent for American baby boomers, increased 29 points to 63 per cent for UK baby boomers and increased 6 points to 32 per cent for German baby boomers.
Impact investing gained appeal for men and women over the years surveyed. In the United States, appeal was up to 63 per cent for men (from 57 per cent in 2020) and 59 per cent for women (from 46 per cent in 2020). In the UK, appeal was up to 66 per cent for men (from 48 per cent in 2020) and 60 per cent for women (from 48 per cent in 2020). In Germany, appeal was up to 50 per cent for men (from 40 per cent in 2020) and 38 per cent for women (from 29 per cent in 2020). In all four countries, women were less likely than men to say impact investing was unappealing.
The top cause for respondents in the UK (34 per cent), Australia (30 per cent) and Germany (34 per cent) was the environment and climate change, whereas in the U.S. the top concern was health care and disease prevention and cures (25 per cent).
As an asset manager with an impact on global health, American Century Investments has a unique perspective on sustainable investing. More than 40 per cent of American Century dividends go to the Stowers Institute for Medical Research, a biomedical research organization with an equity stake in American Century.
“With the Stowers Institute as our controlling owner, doing good for the world comes from doing well for our clients. Over the last 22 years, we have generated more than USD1.87 billion for their medical research as we strive to generate returns for our clients. With our history and culture, we believe we are better positioned than anyone in the industry to help clients navigate sustainable investing that can do good for the world while helping our clients prosper with purpose,” says Jonathan Thomas, president and chief executive officer of American Century.
In its 2022 environmental, social and governance (ESG) outlook, American Century identified those top concerns among those surveyed, as well as empowerment (labor), sustainable living (food crisis) and digitalisation (cyber), as areas that would dominate the ESG space in the coming year and beyond.
“Our approach to ESG and sustainable investing focuses on the opportunities within the areas of empowerment, sustainable living, environment, digitalisation and health care to innovate solutions, address critical challenges and transform society. These important themes shape our research agenda, engagement and proxy voting activities to not only contribute to transforming society but doing so while striving to deliver superior, long-term, risk-adjusted returns,” says Bratton Hughes.
Concerns about greenwashing continue, with half or more of respondents in the UK (58 per cent), U.S. (50 per cent), Germany (50 per cent) and Australia (51 per cent) believing greenwashing has increased. Despite this, less than half of respondents in the U.S. (44 per cent), UK (39 per cent), Germany (38 per cent) and Australia (39 per cent) reported greenwashing influenced their interest in impact investing.
“We expect greenwashing not only to remain a concern, but to expand beyond environmental or climate claims to claims related to all Sustainable Development Goals. The combination of regulatory pressure, investor demand and industry cooperation will help drive clarity, consistency and transparency across the sustainable investing space,” says Bratton Hughes.
A significant share of people is willing to sacrifice returns for a positive impact. In the UK, 39 per cent of respondents reported a willingness to sacrifice returns for a positive impact, followed closely by respondents in the U.S., 38 per cent. A staggering 50 per cent of U.S. millennials are willing to sacrifice returns for a positive impact, with similar numbers in the UK (49 per cent) and Australia (45 per cent).
“In our view, this trade off isn’t necessary and isn’t the future of sustainable investing. Sustainable investing is more than just a risk mitigator. We believe it’s also an alpha generator. This is alpha plus: sustainable and impact strategies have the potential to provide market-beating returns coupled with societal and environmental alpha,” says Bratton Hughes. “We expect this alpha plus approach to appeal to the majority of people who are either unsure or unwilling to sacrifice returns for a positive impact.”