What Sort of Social Investor Are You?

Julian Lyne: Newton have been involved in the sustainable investment space in many forms since our inception over 40 years ago. We’ve been talking to clients around the globe about sustainability and what it means to them, but one of the things that has been lacking, I think, is data, and real analysis about the end user – the individual on the street – their interest in sustainability and what it means to them. To try and rectify that we engaged with Oxford Risk – and I’m joined here today by Greg Davies – to do some research in the UK and the US to try and understand what individuals thought about societal investing and sustainability, and really get a sense of how we as asset managers can help them meet their investment needs. Greg, thanks for joining us today. Perhaps you can just give me a bit of oversight into the research that that you and your organization did, and some of the findings that were delivered.

Greg Davies: What we were trying to do is to really dig deep into understanding people’s attitudes – what is it that drives their desire to do social good with their wealth, what drives them to philanthropy, what drives them to social investing – and to look and see are there common groups of attitudes there that help us to understand better where the gaps are in trying to make this actually work in practice.

JL: So in terms of that the findings that came out, what was the key thing that struck you when you looked at the research, both in terms of the UK and US?

GD: Well, I think the key thing, absolutely, is that if you ask people “Are you interested in making sure that your wealth does social good as well as providing a financial return?”, the answer is ‘yes’ 70% of the time, so there is an interest there, there is an appetite out there. But, there is a gap, because if you then ask people “Have you heard of social investing? Have you done it before? What is your level of knowledge about it?” – you get a very, very different set of responses. So somewhere between the desire and the knowledge and the awareness is a very big gap, and actually this dwarfs everything else. We can talk about what’s different about different groups of people, but the first thing we have to do is simply get the message out there.

JL: Perhaps you can talk a little about Oxford Risk, clearly leaders in this space, perhaps you can talk a little about the organization and the techniques that you use in order to get this insight.

GD: Oxford Risk is a spin-out of Oxford University. We are a specialist team of decision scientists and behavioral scientists, and we focus specifically on financial decision-making, so our job is to look at understanding how and why people make the financial decisions they do, and then in building tools to help people to make better financial decisions. Our interest in this space, apart from the sheer importance of it to society and indeed to financial decision-makers, is that it is about understanding the emotional components as well as the financial drivers of what leads people to make decisions, and you simply cannot do that without a behavioral-science lens.

JL: You give me a beautiful segue there because I think one of the things that’s resonated when I’ve shown this report to individuals both in the US and the UK, is the breaking down of those individual types.

GD: Something we found in both the US and the UK research populations was that there are very clear groups of people that share common ‘bunches’ of attitudes, if you like. In both places there seem to be six clear groups, and what is important here is what each of those groups wants to do with their wealth is different, and the narrative that you would use, the story that you need to use to get them excited about it, is different. If I do a very quick summary, there are two groups that, frankly, we are a long way from exciting. Then there are two groups in the middle – a moderately interested group – and a set that was interesting because they’re actually quite altruistic but are very skeptical at the same time.

And then at the top end, there are the people who desperately want their portfolios to be doing social good. The most interesting group at the top – and these the people who are likely to do the most – are the ones who actually really want this to be done efficiently.

JL: I think what’s fascinating – and I’ve engaged with this in terms of institutions and intermediaries – it’s that angle of how can we deliver what people are looking for, because I think there’s a conversation, there’s lots of noise, but we’re not seeing much flow and actual uptake.

GD: Well I think that most important is if you’re going to get intermediaries to actually have these conversations with the end client, what we’ve shown here is that it needs to be personalized, it needs to be tailored.

JL: If I take it at an institutional level, when we talk to pension plans, what we say is “this is your cohort, these are things that they’re looking for”. And really reassure people, though there’s no ‘one size fits all’, there are a number of options that can be right for their individual cohort and their individual needs, and I think getting the ball started, having a fund option, having a conversation, having that education is really the message that we’re taking, and that seems to be resonating.