According to a 2018 study, more than $12 trillion in assets in the U.S. alone were managed in a sustainable process, compared to $639 billion in 1995.1
Despite this exponential growth, financial advisors and individual investors have remained largely on the sidelines, even as institutional investors have embraced sustainable investing. Of the $12 trillion in sustainable strategies, an estimated 74% were managed on behalf of institutional investors, while the remainder was managed on behalf of individual investors.2
Another 2018 study showed that only one-fourth of financial advisors currently employ ESG strategies in their clients’ portfolios.2 And, in a 2019 study performed here at New York Life Investments, we found that only 20% of investors surveyed had a financial advisor who recommended using an ESG-based strategy—while 38% of those same respondents stated that they have an extremely high interest in discussing these types of strategies with their financial advisor in the future.3
So, what are the reasons advisors and individual investors are holding back? Well, the industry’s fondness for jargon certainly hasn’t helped matters. A confusing range of acronyms—ESG, SRI, SDG, PRI and so on—may be one barrier. In addition, there are persistent misconceptions about sustainable investing. Many of these myths have some basis in reality, which may be why they continue to persist so stubbornly. In this piece, we address some of those key myths and shine a light on the realities of sustainable investing.
1. Source: The Forum for Sustainable and Responsible Investment (US SIF), “Trends Report 2018.”
2. Source: Ginger Szala, “Why Are Advisors Reluctant to Hop on the ESG Train?” ThinkAdvisor, 12/4/18
3. Source: New York Life Investments and RTi Research, September 2019. Results based on survey questions asked of 594 investors, both men and women, with investable assets over $250k, ranging in age from 25-39; 40-54; and 55+.