Older investors who rely on retirement savings to pay for living expenses are largely opposed to ESG initiatives and unwilling to suffer financial loss to advance environmental and social goals.
ESG is overwhelmingly supported by young investors who want investment managers to take an active stance on climate change, diversity, and other stakeholder initiatives.
The stark difference across age groups underscores the challenge investment managers face in balancing the goals of investors with different views and financial needs.
“We see extreme differences in investor support for ESG driven largely by age and stage of life,” says Professor David F. Larcker, Stanford Graduate School of Business and Rock Center for Corporate Governance. “Older investors who are living off their retirement savings are much less concerned with environmental and social issues and much more concerned with making sure fund managers focus on generating financial returns to support their spending needs. Older investors oppose fund managers taking activist positions on ESG issues and are unwilling to see their investment balances decline to advance these objectives.”
“ESG activism is clearly driven by younger investors,” adds Professor Amit Seru, Stanford Graduate School of Business and the Hoover Working Group on Corporate Governance at Stanford University. “Investors under 40 want to see companies make progress across a broad range of environmental and social initiatives and claim to be willing to suffer personal financial loss—sometimes very large loss— to see those changes realized. The many years they have until retirement and high expectations for future stock market growth might encourage them that any cost to ESG activism can be recovered.”
“The vast differences across age demographics means that institutional managers are going to have to think hard about the stances they take on environmental 2022 SURVEY OF INVESTORS, RETIREMENT SAVINGS, AND ESG and social proxy proposals,” observes Professor Stephen Haber, School of Humanities and Sciences Stanford University and Hoover Working Group on Corporate Governance at Stanford University. “While some investors favor these, many others strongly oppose them. More and more fund managers might find that the best solution is to poll their investor base on how to vote and split votes to reflect the divergent views of various groups.”
In summer 2022, Stanford Graduate School of Business, the Hoover Working Group on Corporate Governance at Stanford University, and Rock Center for Corporate Governance at Stanford University jointly conducted a nationwide survey of 2,470 investors—distributed by gender, race, age, household income, and state residence—to understand how American investors view environmental, social, and governance (ESG) priorities among the companies in their investment portfolio.
Respondents run the spectrum of personal investment assets from less than $10,000 to more than $500,000 (average $200,000) in retirement and personal savings accounts. Their investments are held through a variety of major institutional investors, including Fidelity (47 percent), American Funds (40 percent), Vanguard (31 percent), Invesco (18 percent), BlackRock (16 percent), and State Street (16 percent), among others.
Read the Study: 2022 Survey Of Investors, Retirement Savings, And ESG