October 06, 2004
Global Survey of Socially Responsible Investment Finds Information Lacking
by William Baue
Questionnaire respondents express frustration over the reliability of social and environmental
information on their SRI holdings, and financial planner ignorance of SRI.
What do investors take into account when considering socially responsible investment (SRI), and
what obstacles are there to the uptake of SRI?
To get into the minds of investors
considering or practicing SRI, Matthew Haigh, a doctoral candidate studying SRI at Macquarie University in Sydney, Australia who
teaches at Griffith University in Brisbane,
conducted a survey of investors worldwide on their attitudes toward SRI. The most significant
findings: investors perceive an information gap on social and environmental issues that holds them
back from greater uptake of SRI, and they primarily fault financial planners who are undereducated
"Investors in this study, in particular, were dissatisfied with the
apparent ignorance of fund managers and financial planners with respect to social and environmental
issues," said Mr. Haigh. "Financial planners were considered ignorant of SRI products and unable
to offer relevant advice."
The questionnaire upon which the study was based yielded 404
responses, the majority (55 percent) of which came from Australia, with a little over a third (35
percent) coming from the US and Canada. The remainder of the responses, which came in from April 1
through May 14, 2004, issued from Denmark, the Netherlands, France, the United Kingdom, the United
Arab Emirates, South Africa, Hong Kong, and New Zealand.
What were the most
important considerations in respondents' investment decisions?
"Unexpectedly, the only
important economic factor was track record for financial performance . . . [otherwise,] the
selection criteria that respondents rated important were all non-economic in nature," said Mr.
Haigh. "Most important was the accuracy of information reported about social and environmental
aspects of the stocks held in portfolios."
Conversely, lack of such information hindered
respondents, most of whom intended to purchase or maintain their SRI holdings, from pursuing social
"[H]alf of the respondents who were aware of SRI products had chosen not to
invest in them," Mr. Haigh said. "Over half of investors in this study considered that information
relating to or supplied by socially responsible mutual funds was insufficient, too complex, or not
credible, opinions which were significantly associated with their intentions to purchase SRI
This information gap also led to sell-off, as 18 percent of respondents who
bought SRI products subsequently sold most or all of those investments.
"Most had done
so because they were dissatisfied with the amount of information provided on the
social/environmental profiles of their investments," said Mr. Haigh.
included those who currently hold SRI products (mutual funds and pension funds), those who formerly
held them, and those considering them. Respondents were predominantly male (56 percent), single
(68 percent), and well educated (53 percent are postgraduates, while 83 percent hold bachelor
degrees). The largest concentration of respondents (37 percent) was under 35, though respondents
ranged the investment-age spectrum. This profile concurred generally with previous Australian and
British studies of social investors, which only differed in finding a predominance of women
investing in SRI.
This profile differs substantially from studies of mainstream
investors, though. According to 2001 US survey data studied by the Investment Company Institute (ICI), for example, mainstream investors tend to be
married or living with a partner, older (median age of 46), and less well-educated (52 percent
college graduates) than social investors.
Respondents who lean toward SRI tend to have
smaller holdings: 40 percent more of respondents invested in mutual funds in the $1,000 to $20,000
range chose SRI over mainstream investments.
"The relationship reversed in higher dollar
holding brackets," said Mr. Haigh. "Only 15 percent of investors in this study who held both types
of mutual funds had greater dollar holdings in socially responsible mutual funds."
study suggests that financial planners would do well to bone up on social and environmental issues,
and that the global SRI community can do a better job of delivering information to investors.
Perhaps the most significant finding of the survey is the apparent disconnect between respondents'
intentions to support their social and environmental values by purchasing SRI funds, and their
discovery that these funds may not achieve these objectives.
"Over half of respondents who
had purchased SR funds suspected that their portfolios did not adequately reflect the social and
environmental values that had originally attracted them to the products," Mr. Haigh concluded.