Investors interested in responsible investing but lack knowledge: survey

Investors are interested in adding responsible and impact investing to their portfolios — they’re just not sure what the terms really mean, according to the 2020 Canadian Mutual and Exchange Traded Fund Survey.

“Knowledge is not extremely high in [respect to] responsible investing or impact investing,” said Lesli Martin, vice-president, public affairs at Pollara Strategic Insights, which conducted the survey in partnership with the Investment Funds Institute of Canada (IFIC). Martin discussed the results Monday at the 2020 IFIC Annual Leaders Conference.

According to this year’s report, 50% of mutual fund investors and 62% of ETF investors say they are either “very knowledgeable” or “somewhat knowledgeable” about responsible investing. Knowledge of impact investing was even lower with only 36% of mutual fund investors and 43% of ETF investors saying they were somewhat to very knowledgeable on the subject.

The survey defines responsible investing as a strategy to incorporate environmental, social and governance (ESG) criteria into investment decisions. Impact investing is defined as investments made into companies, organizations and funds with the intention to generate a measurable, beneficial social or environmental impact alongside financial returns.

This was the first year that the annual survey included data on responsible and impact investing.

The survey results also reveal confusion about whether responsible investments will have a positive (69% of mutual fund investors, 63% of ETF investors) or negative effect (47% of mutual fund investors, 53% of ETF investors) on their portfolios, according to Martin.

Furthermore, many advisors are not helping to dispel the confusion around responsible investing, according to the report.

“Advisors are not having conversations with their investors about these types of investment,” said Martin.

Only about one-quarter of mutual fund and ETF investors say their advisor or financial institution has asked them about their interest in responsible investments, while only one-fifth said the same for impact investing.

Despite a lack of knowledge about responsible investing, investors are interested in learning more about this strategy. For example, 61% of mutual fund and ETF investors who do not currently own responsible investments are “somewhat likely” or “likely” to include such investments in their portfolio in the next couple of years.

Executives in the financial industry, as well, are aware of the growing interest in responsible investing, and believe it is a trend that’s here to stay.

“It’s going to be of growing interest for everybody. People are investors but they’re also global citizens,” said Bernard Letendre, head of wealth and asset management for Canada at Manulife Investment Management, who spoke at the IFIC conference.

“They live in this world and they see forests burning and they see  growing inequality. People want to know when they’re investing their money, they’re actually contributing to something that will make the world better as opposed to making it worse.”

Research for the Pollara survey was conducted via phone interviews of 1,138 mutual fund investors and 500 ETF investors between May 28 and July 5, 2020.