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Portfolio > Portfolio Construction > ESG

Investors Expect Financial Firms to Embrace Sustainability

By Michael S. Fischer

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What You Need to Know

  • As 64% of respondents have a positive overall opinion of sustainable investing, many Americans are interested in taking action.
  • Investors are increasingly focused on the role of financial services firms and insurers in sustainable investing.
  • But only 52% of respondents said they understood how financial services firms decide to invest their money.

Sustainable investing has solidified its position as a creditable investment option, and will likely hold that position for a long time to come, according to a study released by Allianz Life this week.

The study also found that Americans now expect financial services and insurance companies to implement sustainable investing standards as part of their standard investing process.

The findings were based on an online survey Allianz Life conducted in April with a nationally representative sample of 1,000 adult respondents with an annual household income of at least $50,000.

Strong Interest 

The 2021 Allianz Life Sustainable Investing Study found that 64% of respondents hold a positive overall opinion of sustainable investing, despite the volatility of recent years. 

Many Americans are also interested in taking action. Fifty-two percent of survey participants who are not currently participating said they were interested in allocating funds to sustainable investments.

Respondents who have already chosen sustainable investing appear to be committed, putting 46% of their total investment portfolio toward companies that adhere to sustainability principles.

Not only that, they are not afraid to use their investments as leverage. 

Sixty-eight percent of respondents said they believe that reallocating investments away from companies that do not adhere to sustainability principles to those that do is an effective way to punish or reward companies for their actions.

Increased Expectations

The study findings indicate that investors are increasingly focused on the role financial services companies and insurance carriers play in sustainable investing. 

Some two-thirds of respondents agreed that a financial services company can have a significant effect on environmental sustainability efforts, and that, collectively, a commitment in the industry to environmental sustainability could make a positive difference. 

They felt the same away about insurance companies.

“Sustainable investing leads to sustainable outcomes,” Allianz Life’s chief investment officer, Todd Hedtke, said in a statement.  “Financial services and insurance companies are in a unique position and can play a critical role in the adoption of sustainable investing principles.” 

Hedtke said industry leaders have adopted investing criteria that use a sustainability lens for evaluating potential investments. “It has a powerful domino effect toward bringing more companies in line with efforts to create a more sustainable future.”

A major effect of the increased focus on the financial services and insurance industries is a new expectation. 

Sixty-three percent of survey respondents said financial services companies have a responsibility to do whatever they can to mitigate the climate crisis, and 59% felt insurance companies have the same obligation.

Respondents are also drawing a clear line between sustainable investing and better outcomes, the survey found. 

Sixty-two percent said financial services companies that embrace environmental sustainability are better positioned for long-term success, and 58% said the same about insurance carriers. 

Moreover, nearly two-thirds of those surveyed said that if they were making a decision on which life insurance policy to choose, they would choose the policy from the carrier that is committed to incorporating principles of sustainability into their investment decisions.

“The firms that choose to ignore these principles will face increasing costs, rising negative sentiment among investors, and, ironically, a less than sustainable future themselves,” Hedtke said.

Amid these increased expectations, however, the survey also identified a need for investors to become more informed about the investing process. 

Only 52% of respondents said they understood how financial services companies make decisions about how to invest their money, and just 38% could name specific financial services companies that successfully invest their assets in environmental sustainability efforts. 

Even fewer said they understood how insurance companies make investment decisions, or could identify any insurance companies that successfully invest in environmentally responsible ways.

(Image: Shutterstock)

Michael S. Fischer

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