If responsible investing piques your interest, don’t wait for your financial advisor to discuss the subject with you in depth. Because you may never hold mutual funds or stocks that respect the principles that are dear to you.
Posted at 6:30 a.m.
Even if the media have published an incalculable number of texts on responsible investments and ESG (environmental, social and governance) criteria, it is clear that information does not always go where it should.
A survey conducted by Léger for ÉducÉpargne, the results of which will be revealed on Monday, reveals that 65% of Quebecers who entrust their money to a financial professional have never heard of the subject. Worse, only 9% were entitled to explanations worthy of the name. While climate change is worrying and the values of sound governance are at the heart of concerns, it is quite troubling.
At ÉducÉpargne, an NPO dedicated to the financial education of Quebecers, the general manager Louis-Alexandre Lacoste agrees that there are “a lot of efforts to be made” on the side of financial institutions to better inform savers. “I get the impression that those who deal with responsible investing don’t necessarily have direct contact with clients,” he says.
Avoiding the subject causes a vicious circle. The less advisors talk about responsible investing, the less their clients develop interest and curiosity in the matter. At the limit, the lack of enthusiasm and promotional efforts can even cause mistrust.
The silence is all the more regrettable since 53% of Quebec workers say they are very (11%) or somewhat (42%) interested in responsible investment strategies and products, according to ÉducÉpargne. That’s a lot of people who remain on their appetite when it comes to investing.
Professionals mainly justify their lack of ease by a lack of information, revealed a report by the Association for Responsible Investment (AIR) published at the beginning of the year. The reason “I don’t know much about it” was chosen by 70% of advisors.
The vast majority are right to avoid the subject. Imagine, among the 539 advisors who participated in the study in Canada, only 32 (6%) were able to correctly identify, among ten statements on responsible investment, the three that were correct.
“Furthermore, some advisors seem to overestimate their knowledge, as nearly one-fifth of advisors who claimed to have an excellent or very good level of knowledge about RI failed to correctly identify one of the three true statements,” reports the ‘AIR. It’s not reassuring.
Advisors surveyed also expressed some level of concern about greenwashing (greenwashing), lack of standards, financial performance, quality of products offered, lack of fund certification, etc. Admittedly, these are very legitimate questions.
Still, “50% of investors do not receive the information they would like their advisers to give them”, calculates the AIR.
The ÉducÉpargne survey also reveals significant disparities in Quebecers’ interest in financial products and investment strategies that respect ESG criteria.
In the Montreal region, 63% of respondents would like to learn more about the subject. The rate plummets to 34% in the Quebec region. Quite a gap.
“It is particularly respondents with a university degree, a mother tongue other than French and who were not born in Canada who have a significantly higher interest in responsible investments. These profiles of people live more in Montreal,” explains Roxanne Bazinet, research director at Léger.
As for the ESG acronym, it would greatly need viral advertising to increase its notoriety.
Less than one in four people (23%) can identify the meaning of the three letters, even when answer choices are provided! And 40% of respondents did not even dare to select an answer. These figures show that there is still a long way to go before environmental, social and governance criteria are a natural part of conversations.
The issue of returns generated by responsible investment products must also be clarified once and for all. Roughly speaking, half of Quebecers believe that responsible investments bring in the same or more.
The other half believes the opposite or ignores the answer. Opinions are very divided. However, studies have concluded for years that taking ESG factors into account has a neutral or positive impact on returns.
I agree, taking out weapons, oil, tobacco or pornography from your RRSP is far from obvious. But efforts are being made to make life easier for savers. Desjardins, for example, has summarized its policy and approach to creating its responsible mutual funds in five short pages.
On the side of ÉducÉpargne, we will hold a webinar on the question on September 23 which, we promise, will allow everyone to understand and then ask the right questions. But you still have to get the right answers.