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Millennials, Women Aren't the Only Fans of SRI

A new Morningstar report suggests there is broader support for sustainable investments, beyond women and millennials.

Financial advisors may be relying on simplistic stereotypes about which clients would be interested in sustainable investing, and in doing so may not be considering sustainable investment strategies that would appeal to them, according to a new report from Morningstar.

While some advisors may consider sustainable investing a small market that appeals only to certain demographics, the report found wide-ranging interest in sustainable investments, noting that gender and age were not reliable barometers when gauging passion in sustainable investing.

“The dominant industry narrative says that interest in sustainable investing among retail investors is confined to a niche market of mostly millennials and women,” the report reads. “Our results suggest that there may be a broader appetite for sustainable investing.”

To determine investors’ interest and sidestep potential biases, Morningstar developed a tool called My Sustainability Profile, which asked investors to repeatedly choose between two investment options rated both by sustainability and their five-year annualized total return. The tool then determined an investor’s “sustainability preference score” based on their choices, ranging from zero to 100. Investors were then placed in one of five categories, ranging from “returns-driven” with a low interest in sustainability (and a score of 0-19), to “sustainability-driven” with a score of 80 to 100.

Ray Sin, a behavioral scientist with Morningstar and author of the report, said advisors' faulty preconceptions may stem from how questions about investors' interest in sustainability were asked in the past. Using a methodology that asked investors to make trade-offs between options meant investors could reveal their true preferences, according to Sin.

“That’s because behavioral research shows that people don’t always know their own preferences,” Sin told “If forced to impose a particular constraint like forcing trade-offs, you allow those preferences to surface, and preferences arise that people may not know that they have. When they make that trade-off, they realize that they are interested.”

The report showed that only 11% of respondents had a low interest in sustainability, with 21% of respondents expressing high interest in sustainable investments (28% had a medium interest, and “medium-high” interest was at 23%). While there was a slightly stronger preference for sustainable investment among women (driven primarily by more women expressing strong interest in sustainability), the difference disappeared after controlling for variables, including age, income, risk tolerance and others.

Likewise, generation gaps had little impact on investors’ interest in sustainability. Researchers found the average preference score for millennials and Generation X to be “statistically equivalent,” with millennials showing a slightly higher interest in sustainability compared with baby boomers (again, this difference dissipated after controlling for sociodemographic variables).

“We’re at the top of the iceberg, trying to figure out what investors care about,” Sin said. “I think investors are looking for portfolios that meet their financial and nonfinancial goals.”

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