Responsible investing’s role in risk mitigation

Seventh annual responsible investing survey

In our seventh annual responsible investing survey, investors told us that they have become increasingly focused on risk mitigation, and are seeing the benefits of their responsible investments.¹

Executive summary

• It was a double-whammy for many investors in 2022, as major stock and bond benchmarks succumbed to heightened volatility and steep price declines. In our seventh annual responsible investing (RI) survey, respondents expressed their views on the role that responsible investing strategies can play to help diminish market risks. 
• This year’s survey finds that investors believe that integrating responsible investing principles into investment portfolios plays a significant role in mitigating market volatility. An education gap remains — survey results indicate that advisors have a continuing role to play in directing and educating clients about responsible investing; survey respondents say they want to hear more from advisors about responsible investing. Respondents say they are looking to access information and tools that help demonstrate the benefits of RI and point to specific investment options.
• Our survey shows an increasing preference for customization and the desire for advisors and investors to ensure portfolios reflect personal values. Respondents view RI as an increasingly integral part of an overall investment strategy, and one that remains important even in times of volatility.
• Our survey interviewed over 1,000 investors with at least $100,000 in investable assets. The respondents were 60% male and 40% female. 27% have some form of graduate degree, while a further 32% have a bachelor’s degree. By generation, 33% identify as Millennial/Gen Z (25% of our investors were aged 30-39), while 19% identify as Gen X and 47% as Boomers, with 31% of respondents aged over 65.

Amy O'Brien discusses the seventh annual responsible investing survey

Key findings

Proportion of investors who agree with the following statements:

RI should always be incorporated
76%

Factoring in RI risks and opportunities should always be part of the investment process.

79%

RI is a framework that incorporates material factors not typically accounted for in traditional financial analysis.

68%

RI is a strategy I can use to mitigate market risk in my portfolio.

Need to see impact
83%

Being able to see the specific societal or environmental benefits of my RI makes me want to allocate more.²

65%

Use own research to decide allocation to RI in portfolio.

78%

It is important that the company managing my money is knowledgeable about RI.

Companies need to be more transparent
75%

Investors in companies should use their ownership role to get companies to address their RI risks and opportunities.

57%

Would be interested in shifting to an investment strategy that owns only companies with net-zero carbon emissions.

80%

Investors should view RI as a long-term strategy.

Conclusion: The benefits of partnership

2022 was a challenging year for investors, and our survey showed that heightened volatility prompted respondents to place greater emphasis on minimizing market risks. Importantly, survey responses showed greater interest in responsible investing strategies and a desire to better understand the potential risk-mitigation opportunities that RI presents. Many others see RI as a means to align their investments with their personal values.

More investors are reporting that they have good knowledge of RI. Individual research and enthusiasm has taken on a momentum of its own, independent of advisors, but our respondents consistently want more help from advisors to see the specific benefits of RI. This might be seen as something of an inconsistency, but we view it as being a logical extension of people being increasingly engaged with RI. The vast majority of investors still rely on their financial advisors for their investment advice, but they are increasingly doing their own research as well, and trying to make investment decisions blending their advisor recommendations and their own desire to have investments reflect personal values.

And where advisors can add the most value is to help investors see the specific benefits of RI, and to give investors that knowledge to help them tie the two ends of the conversation together – best investment practices and having portfolios reflect personal values. We consistently see this as a virtuous cycle, where investors being able to see the benefits of RI would encourage them to do more of it.

We also see that advisors retain a large influence over their client’s portfolios, and while investors are conducting more and more of their own independent research, they also want their advisors and investment companies to be knowledgeable about RI, and to be able to explain the benefits and risks of such strategies.

Overall our respondents are increasingly integrating RI and their efforts to mitigate market risk, and they are continuing to see RI as a long-term integral part of their investment process. Advisors need to provide data to allow investors to see the benefits of RI, while supporting overall efforts to align portfolios and personal values.