How can you help clients better understand their ESG fit?

“In the world of behavioural science, that’s called the say-do gap. People say what they would like, or they would value, and what’s important, but sometimes they do something very different.”

While it’s a completely normal human response, Brenneman said people tend to invest in something more concrete – like solar panels – rather than social issues. But, they will often address the social – rather than environmental – issues, through their philanthropic donations.

TD Wealth does a new survey each year, and this year’s Behavioural Finance Industry Report surveyed 1,500 affluent and emerging affluent Canadian investors. It found:

91% of the current sustainable investing (SI) investors said ESG issues were important to them
49% said they want to make investments that align with their personal values, especially in social issues
70% of women and only 55% of men want to include SI mandates in their portfolios
62% of those surveyed said they intend to pursue SI in the next year

But, there was a real disconnect when it came to the survey respondents’ actual portfolios or behaviours:

only 8% of respondents had SI strategies in their portfolios
51% of current and future investors allocate, or intend to allocate, less than 25% of their portfolio to SI
Only 17% would allocate more than half of their portfolio to SI
while social issues dominated the list of ESG issues that investors deemed ‘very important’ to them, all of the top five investing issues were actually environmentally-focused
35% of those who intended to invest in SI over the next year have no idea how to do it or how much to invest

The other thing that Brenneman noted was that the survey showed is that people don’t really know the term, ESG. They also find the area complex and confusing, and there are still misconceptions of what it is and what it can do. Brenneman said those who are already investing in SI are quite positive about its ability to delivery strong returns, but those who aren’t are much more pessimistic about it.