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American Century Investments®' impact investing survey shows growth of greenwashing concerns and individuals' willingness to sacrifice returns for impact
May 25, 2022 - Kansas City, Missouri.
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 across geography, generation and gender, along with favorable economics and a supportive political and regulatory environment that will drive changes and advances in sustainable investing over the coming year," said Sarah Bratton Hughes, senior vice president and head of ESG and sustainable investing for American Century Investments.
Appeal of impact investing increases across geography, generation and gender In the United States, 61% of respondents found impact investing appealing, up from 51% in 2020. Similarly, the appeal in the United Kingdom rose to 63%, up from 48% in 2020. The appeal in Germany increased from 35% in 2020 to 44% in 2021. The lower appeal of impact investing by German respondents relative to the other countries was driven by the statistically significant larger share who reported they didn't know if it was appealing or not (35%) compared to the U.S. (17%), UK (17%) and Australia (18%). Statistically similar shares of respondents in the U.S. (22%), UK (20%), Germany and (21%) Australia (24%) indicated they found impact investing unappealing.
The majority of respondents in the U.S. (61%), UK (63%) and Australia (57%) found impact investing appealing, with appeal even higher among millennials (66%) and Gen Xers (64%) in the U.S.; millennials (67%) in the UK; and millennials (68%) and Gen Xers (60%) in Australia. 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% for American baby boomers, increased 29 points to 63% for UK baby boomers and increased 6 points to 32% 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% for men (from 57% in 2020) and 59% for women (from 46% in 2020). In the UK, appeal was up to 66% for men (from 48% in 2020) and 60% for women (from 48% in 2020). In Germany, appeal was up to 50% for men (from 40% in 2020) and 38% for women (from 29% in 2020). In all four countries, women were less likely than men to say impact investing was unappealing.
Environment the largest concern internationally, while health care topped American concerns The top cause for respondents in the UK (34%), Australia (30%) and Germany (34%) was the environment and climate change, whereas in the U.S. the top concern was health care and disease prevention and cures (25%).
As an asset manager with an impact on global health, American Century Investments has a unique perspective on sustainable investing. More than 40% of American Century dividends go to the Stowers Institute for Medical Research , a world-class 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 $1.87 billion for their medical research as we work to generate returns for our clients. With our history and culture, 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," said 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 digitalization (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, digitalization 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 delivering superior, long-term, risk-adjusted returns," said Bratton Hughes.
Alpha plus: Sustainable investing as an alpha generator A significant, and increasing, share of people are willing to sacrifice returns for a positive impact. In the U.S., 38% of respondents reported a willingness to sacrifice returns for a positive impact, up from 33% in 2020. A staggering 50% of U.S. millennials are willing to sacrifice returns for a positive impact, with similar numbers in the UK (49%) and Australia (45%).
"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 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," said 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."
Greenwashing concerns also continue to increase, but don't deter appeal Concerns about greenwashing continue, with half or more of respondents in the U.S. (50%), UK (58%), Germany (50%) and Australia (51%) believing greenwashing has increased. Despite this, less than half of respondents in the U.S. (44%), UK (39%), Germany (38%) and Australia (39%) 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," said Bratton Hughes.
Survey methodology Impact investing is financial investments designed to have a positive impact on society, while providing potential long-term returns. The 2021 survey was conducted among a representative sample of 1,008 U.S. adults, 1,003 UK adults, 1,016 adults in Germany, and 1,006 adults in Australia 18 years of age and older from November 17-19, 2021 in the U.S. and November 16-21, 2021 internationally. The study was fielded using ENGINE's Online CARAVAN® Omnibus Survey. The results from the survey were weighted by age, sex, geographic region, race and education to ensure reliable and accurate representation of the adult U.S., UK, Germany and Australia. Previous years' survey results can be found here.
About American Century Investments
Who We Are
American Century Investments is a leading global asset manager focused on delivering investment results and building long-term client relationships while supporting breakthrough medical research.
Quick Facts
Founded in 1958, American Century Investments' 1,400 employees serve financial professionals, institutions, corporations and individual investors from offices in Kansas City, Missouri; New York; Los Angeles; Santa Clara, California; Portland, Oregon; London; Frankfurt, Germany; Hong Kong; and Sydney.
Management
Jonathan S. Thomas is chairman, chief executive officer and president, and Victor Zhang serves as chief investment officer.
Giving Back
Delivering investment results to clients enables American Century Investments to distribute over 40% of its dividends to the Stowers Institute for Medical Research, a 500-person, nonprofit basic biomedical research organization. The Institute owns more than 40% of American Century Investments and has received dividend payments of more than $2 billion since 2000.
The portfolio managers use a variety of analytical research tools and techniques to help them make decisions about buying or holding issuers that meet their investment criteria and selling issuers that do not. In addition to fundamental financial metrics, the portfolio managers may also consider environmental, social, and/or governance (ESG) data to evaluate an issuer's sustainability characteristics. However, the portfolio managers may not consider ESG data with respect to every investment decision and, even when such data is considered, they may conclude that other attributes of an investment outweigh sustainability-related considerations when making decisions. Sustainability-related characteristics may or may not impact the performance of an issuer or the strategy, and the strategy may perform differently if it did not consider ESG data. Issuers with strong sustainability-related characteristics may or may not outperform issuers with weak sustainability-related characteristics. ESG data used by the portfolio managers often lacks standardization, consistency, and transparency, and may not be available, complete, or accurate. Not all American Century investment strategies incorporate ESG data into the process.
