The winds of investing in the U.S. are starting to shift and women, it turns out, are a driving force behind the change.
Women have long been known to make financial decisions based on what’s best for their children and their larger family, they are now also increasingly aligning their investments with what they feel is best for their community, their neighbors and the planet.
This philosophy, known as responsible investing, isn’t exactly new. It’s been popular in Europe for decades and even embraced by large, institutional investors in the U.S. for some time. But, for whatever reason, it hadn’t gained the same momentum among retail investors here.
That is, until now.
According to a new report from non-profit foundation US SIF: The Forum for Sustainable and Responsible Investment, there were $17.1 trillion in responsibly invested assets in the U.S. at the start of 2020. That’s up from $12 trillion just two years prior, a whopping 42% increase.
While there are a few specific types of responsible investing, ESG investing, which seeks to value a company based on its environmental, social and governance practices, is gaining the most traction. In fact, ESG now accounts for a third of all professionally managed assets in the country.
No doubt that the events of 2020 have contributed to the sudden interest in ESG. The effects of systemic racism, inequality in access to health care, legal justice and education, as well as extreme wealth imbalances were seemingly laid bare on a daily basis.
But women and their wealth trajectory are also a key factor in the shift.
Nearly half of American women are the primary breadwinners in their household, an almost four-fold increase since 1960. The number of wealthy women is growing twice as fast as the number of wealthy men as baby boomers age and women continue to enjoy a longer life expectancy than men. In fact by 2030, women are projected to control two-thirds of all the wealth in the U.S.
Clearly, given their growing financial power, the values that women hold will shape how wealth is created, mobilized and passed down to the next generation. And increasingly, studies show that they value the principles behind ESG investing.
A recent survey of RBC Wealth Management U.S. clients found that female clients are almost twice as likely as their male counterparts to say it is important that the companies they invest in integrate ESG factors into their policies and decisions. Our survey also found that female clients are more likely to prioritize ESG impact when considering what companies or funds to invest in, while male clients are much more likely to prioritize financial performance.
A recent report from market researcher Cerulli found that a majority of women in the U.S. under age 60 favor ESG investing. Among the ESG themes most important to them: investing in companies that pay their workers a fair/livable wage; and backing companies with leading environmentally responsible practices.
One could argue that these two surveys measure intent and not action and at the end of the day, how a person says they intend to invest is one thing while what they actually do with their dollars can be quite another. However, when it comes to women and ESG investing, we found that there doesn’t appear to be a disconnect between intent and action.
In 2019, our firm launched three model portfolios focused on ESG investing. We noticed right away great interest in the portfolios from our female advisers. In fact, today 30% of the advisers with client assets in those three ESG portfolios are women. More telling, though, is how strong the interest in these ESG portfolios has been among female clients. As of February, 55% of the individuals invested in these three model portfolios are women.
This figure will only increase as women continue to gain financial wealth and independence. Women’s propensity for caregiving and their desire to make investing decisions that are not only financially sound but also make a measurable impact in society and the environment will be instrumental in moving ESG investing from fringe philosophy to a commonplace strategy in the U.S.
Ann Senne is head of advice & solutions at RBC Wealth Management–U.S.
Due diligence processes do not assure a profit or protect against loss. Like any type of investing, ESG investing involves risks, including possible loss of principal. Past performance does not guarantee future results. RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC.
Source : MTV