AAII Survey: Majority of Retail Investors Uninterested in Socially Responsible Investing

Socially responsible investing (SRI), or social investment, also known as sustainable, socially conscious or ethical investing, is an investment strategy which seeks to consider both financial return and social/environmental good to bring about a positive change. Environmental, social and governance (ESG) investing refers to the three central factors in measuring the sustainability and ethical impact of an investment in a company or business. Some investors use these criteria to help better determine the future financial performance of companies (return and risk).

Here are some recent AAII articles on the topic:

• Identifying and Screening for Vice and Virtue Stocks
• The Next Generation of Socially Responsible Investing

However, there is much debate as to whether selecting companies based on ESG factors yield superior returns.

AAII Weekly Survey Question

These days, more investors are pressuring companies to be socially and environmentally conscious. But exactly how important are these factors when choosing individual companies in which to invest?

To get an idea of the importance of ESG investing, our latest weekly survey question asked:

How interested are you in socially responsible investing?

Here are the results:

In all, 1,031 readers participated. This was one of the lowest vote totals in many months, which could be linked to the low level of interest in this type of investing among our members and readers.

The vast majority of our readers—70%—say they are not at all interested in socially responsible investing.

Only 5% of those participating in the survey say they actively select investments based on ESG factors, while a quarter says they plan on investing based on ESG factors shortly.

Weekly Special Question

Even though an overwhelming number of our members are not interested in selecting companies based on ESG factors, I was still curious about which factors were most important to investors.

So last week’s special question asked:

If you invest in socially responsible instruments or companies, which ESG factor(s) are most important to you?

Given the small number of readers who say they invest based on ESG factors, it’s not surprising that we received only a few dozen responses.

Among this group, though, more than one-third (38%) say they invest in companies that are environmentally conscious.

Another 29% say they do not invest in “sin” companies such as marijuana, alcohol or tobacco firms.

Nearly 9% of our readers avoid companies that deal in firearms or defense contracts.

Here is a sampling of the responses as to which ESG factors are most important to our readers, as well as those offering comments as to why they don’t invest based on ESG factors:

• “If it is usually legal in the U.S., then it has already passed the highest test of morality anywhere else in the world. ‘Socially responsible investing’ is a superficial style that does not sufficiently deal with the intractable problems of humanity.”
• “I avoid tobacco and meat processing because they disgust me. But I don’t like to be categorized into ‘socially responsible’ investing because I am an anarchist who likes his beer and thinks ‘global warming’ is the religious scam of the era.”
• “What the corporation is doing to mitigate their impact on the environment, as well as helping the less fortunate and low/no income people of the world.”
• “I don’t allow others to shape my views of ‘socially responsible’ investing with their arbitrary categories that don’t reflect my nuanced perspectives.”
• “It is shocking to me that 70% of respondents do not consider ESG at all. Such unbridled capitalism and lust for personal financial gain is precisely the attitude that now threatens the system that has made the living standard for such respondents what it is today.”
• “I will not invest in tobacco stocks. I am an ex-smoker and nicotine is extremely addicting and a hard habit to kick. I also will not invest in stocks with a history of discrimination against women and minorities, and refuse to change their ways.”

Everybody has an opinion! Why not give us yours? Participate in our weekly member poll, updated every Monday, and see the results online at www.aaii.com/memberquestion.