Interest in socially responsible funds is increasing as issues like social injustice and climate change take front and centre around the world, but advisors aren’t the ones providing much information on the topic, according to a new investor poll by the Investment Funds Institute of Canada (IFIC).
The annual investor poll, undertaken right in the middle of the COVID-19 pandemic, showed that mutual fund investors continue to have more confidence in mutual funds than other products like stocks, GICs, bonds and ETFs. Confidence in ETFs rose significantly this year and now half of mutual fund investors are also confident in ETFs.
Generally speaking, the confidence rating in investment advisors on behalf of both ETF and mutual fund investors remains high, with mutual fund investors using advisors for most purchases. However, IFIC reported that confidence in advisors by mutual fund investors has dropped five points this year, following a similar five-point drop last year.
“It is particularly interesting to note the strong interest in responsible investment as we continue to work towards greater clarity with respect to the strategies, products and terminology related to this approach,” said Paul Bourque, president and CEO of IFIC.
But the survey also found that investors discovered information about products like ESG and impact investing on their own, not through their advisor.
Knowledge gap
“That clearly shows that there is a knowledge gap on the investor side – and if you talk to advisors there’s probably a knowledge gap on the advisor side – but there is growing interest,” said Damon Murchison, executive vice president, head of Retail, Mackenzie Investments.
ESG funds have risen considerably in the United Kingdom during the pandemic, although some speakers at the IFIC virtual conference said there are still challenges when it comes to ESG investing.
Difficult product to sell
Kathleen Bock, head of Vanguard Americas and managing director, Vanguard Canada, said her company launched its first ESG product more than 20 years ago in the United States. But Bock said it can be a difficult product to sell because investors searching for the product have broad needs.
“When you think about advocating for investors and having their voice heard in terms of social responsibility, it’s the responsibility we all have,” said Bock. She said it’s crucial that Vanguard and other investment firms represent the voice of investors as well as the companies held in the portfolio to steer them in ways that are deemed “responsible.”
ESG will continue to be of growing interest to everyone, said Bernard Letendre, head of Wealth and Asset Management, Canada, Manulife Investment Management.
“They see forests burning and they see the growing inequality and people want to know that when they are investing their money they’re actually contributing, that they’re making the world better as opposed to making it worse,” he said.
The next generation
Letendre said Manulife put together a practicum at Concordia University to help business students learn about how to invest in a socially responsible way and the workshop was oversubscribed. “So you can feel that the next generation has a growing interest for this. I think all of our firms are going to have to think hard as to how to integrate that into the investment product.”
The IFIC survey also noted that 98 per cent of ETF investors who use an advisor are satisfied with the advice they received, with confidence in mutual funds by mutual fund investors at an all-time high. Some 92 per cent of respondents stated they were somewhat confident, confident, or completely confident in mutual funds.
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