Investors’ Attitudes towards ESG
The Stanford Graduate School of Business releases report on Investors’ Attitudes towards ESG, which aims to analyze the attitudes of different types of investors towards ESG and compare whether these views have changed since last year.
This survey involves nearly 1,000 U.S. investors, with an average asset size of US$150,000. The researchers analyze the respondents’ attitudes towards ESG based on their gender, age, income, residence, and other factors.
Related Post: Association of Investment Companies Releases ESG Investor Report
Investors’ Risk Appetite for Environmental Factors
Young investors pay more attention to environmental factors. In terms of investment losses that may be caused by carbon emissions, 59% of older investors are unwilling to lose any assets, while only 22% of young investors do. This may be because investors’ risk appetite gradually declines with age. However, compared with 2022, all investors’ risk appetite for environmental factors has declined, although the proportion of young investors at 22% is significantly lower than 59%, which was only 9% last year.
On the renewable energy factor, investor risk appetite continues to be like that on carbon emissions. Young investors pay more attention to these factors, but their performance is more conservative compared to 2022. On average, younger investors are willing to lose 5% of their assets to achieve environmental goals, while older investors are only willing to lose 2%. At the same time, younger investors with larger assets are willing to bear more losses, but this pattern is not found among older investors.
Investors’ Risk Appetite for Social Factors
Investors behave more conservatively when it comes to social factors than environmental factors. 71% of older investors and 29% of younger investors refuse to bear losses from diversity goals, and 65% of older investors and 27% of younger investors refuse to bear losses from equality goals. This ratio showed a slight improvement in the working conditions of the labor force, with the numbers being 57% and 19% respectively. This means that investors pay more attention to labor working conditions among social factors.
From the average analysis, the losses investors are willing to bear in social factors are like those in environmental factors. Young investors are willing to lose 5%-13% of their assets (the larger the asset size, the higher the proportion of losses they are willing to bear) to achieve social goals, while older investors are only willing to lose 2%.
Investors’ Risk Appetite for Governance Factors
Investors’ risk appetite for governance factors has reached the lowest value among the three ESG factors. 81% of older investors and 36% of young investors refuse to bear losses caused by solving agency problems, and 75% of older investors and 34% of young investors refuse to bear losses from achieving board independence goals. This may be because investors pay significantly less attention to governance issues than environmental and social factors.
From an average analysis, young investors are willing to lose 4%-15% of their assets to achieve social goals, while older investors are only willing to lose 1%-2%.
Investors’ Attitudes towards Active Management by Asset Management Companies
Since most investors rely on asset managers for their investments, it is critical to understand their attitude towards asset managers’ active management. In the scenario where asset managers vote against companies behave bad in climate change, 32% of younger investors and 17% of older investors strongly agree with the decision, compared with 49% and 17% respectively in 2022. In a scenario where asset managers voted on board diversity, 26% of younger investors and 14% of older investors strongly agreed with the decision, compared with 41% and 16% respectively in 2022.
Therefore, investors hope that asset management companies can act conservatively in active management, and the decline in young investors’ preference for ESG active management is obvious.
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