ESG interest holds steady as products proliferate

A pandemic that’s highlighted climate-related and social issues has also thrust the responsible investment (RI) market into the spotlight.

“In just the first nine months of 2021, 63 new RI funds were introduced in Canada, bringing the total number of RI funds to 208,” said the sixth-annual investor opinion survey from the Responsible Investment Association (RIA).

But investor interest hasn’t risen at the same pace as market growth. The RIA found the percentage of those interested in RI (73%, compared with 72% a year ago) has barely changed, though it is up substantially from 2018 (60%).

And only 31% of respondents said they own investments that account for environmental, social and governance (ESG) factors, down slightly from 33% a year ago.

However, a similar proportion of respondents (33%, up from 31% in 2020) said they weren’t sure if they owned ESG investments — a finding consistent with respondents’ “overall reported lack of RI knowledge, as well as their strong interest and desire for more information from advisors,” the report said.

Indeed, the majority of Canadians (69%) reported knowing little or nothing about RI, though that’s an improvement from 75% a year ago. Of that group, 20% said they’ve never heard of RI.

Hurdles for RI

While 77% of respondents said they’d like their financial advisors to tell them about RI investments, only 27% of respondents said their advisors had done so. Further, only 40% of investors aged 18-34 reported being asked about their interest in RI, while only 18% of investors aged 55+ were asked.

Another hurdle is fear of greenwashing, which the survey defined as “false information that is distributed by an organization to make it look more environmentally responsible than it actually is.”

Using this definition, 78% of respondents said they were very or somewhat concerned about misrepresentation in the RI market.

This is an issue that’s exacerbated by investors’ own lack of knowledge, the report added, given that only 5% reported knowing “a lot” about RI.

Even so, respondents were concerned about companies’ commitments to net-zero emissions as well as the transition to a net-zero economy.

For example, 85% of those polled said they strongly or somewhat agreed that Canadian corporations should have goals tied to net-zero emissions, and 86% said it was very or somewhat important that “negative outcomes” be avoided for workers and communities affected when transitioning to net zero.

Further, “77% of respondents agreed strongly or somewhat that they would like a portion of their investment portfolio to be invested in companies that plan to achieve net-zero emissions by 2050 or sooner,” the report said.

Respondents were also interested in the rights of Indigenous communities, with most respondents (70%) noting that they want Canadian companies in their portfolios to partner with Indigenous peoples on energy transition decisions.

The RIA report was based on findings from an Ipsos poll of 1,000 investors conducted for the RIA from Sept. 13 to 16.