ESG investors care about more than just environmental issues

The environmental component gets most of the attention in the ESG — environmental, social and governance — sector of investing.

But a recent study found social and governance issues hold just as much, if not more weight, when consumers decide whether to invest in or do business with a company.

Allianz Life Insurance Co. of North America, based in Minneapolis, found in a national survey of 1,000 adults that a company’s ESG profile plays a significant role in its overall reputation as a majority of consumers believe companies focused on such issues have better long-term prospects.

“Public companies need to do a better job in promoting their social responsibility,” said Kelly LaVigne, vice president of advanced markets at Allianz Life.

When asked about the importance of a variety of environmental, social and governance topics in making a decision to invest, 73% of U.S. consumers cited concerns like natural resource conservation or a company’s impact on climate change.

The same percentage emphasized social issues such as working conditions of employees or racial and gender issues.

But 69% of people highlighted governance topics such as transparency of business practices and finances, or level of executive compensation as being significant in their decision making.

A similar preference for positive social governance results was even more pronounced in relation to consumers’ decisions to actually do business with a company.

More than one-third [34%] of respondents said a company’s stance on social issues was the most important factor followed by 27% who indicated corporate governance issues were a top priority. Less than a quarter cited a company’s record on environmental issues as their chief concern.

Nearly 80% of the people surveyed said they “love the idea of investing in companies that care about the same issues” they do; and 74% believe an environmental, social and governance investment strategy is “not only one that you can feel good about, but one that makes long-term financial sense.”

A full 71% said they would stop investing in a company if it behaved in ways they considered unethical.

“Investors will always put profits first,” Mr. LaVigne said. “But if they can match up the profits with their value system, they feel better about what they are doing.”