Ray Sin, Samantha Lamas, Caroline Brooks

Studies often characterize sustainable investing as having an “advisor gap.” That means while individual investors generally express an interest in sustainable funds, advisors are often deemed less receptive.

For example, a survey conducted by Morgan Stanley found that even though there is a relatively strong overall interest in sustainable investing, particularly among millennials and women, slightly more than 60% of financial advisors reported little or no interest.

One possible explanation is that advisors lack concise information on sustainable investing. In a survey of 1,913 financial professionals, almost half do not and have not offered sustainable funds to their clients now or in the past. And among them, almost 60% cite a lack of information and familiarity on sustainable funds as the primary reason why. However, it is unclear what specific topics on sustainable investing would prompt financial professionals to learn more about it.

How we experimented with words

To better understand which messaging for sustainable funds resonates with advisors, Morningstar ran an experiment on the effectiveness of four targeted messages and one general message sent to 6,936 Registered Investment Advisors, out of which 264 responded.

The targeted messages were based on themes our preliminary research indicated would resonate with advisors. The themes were performance, broaching the topic with clients, understanding trends, and how to identify sustainable funds. In contrast, the general messaging was devoid of any themes and was simply, “Sign up to receive research on sustainable investing.”

What we learned about messaging for sustainable investing 

Overall, we found that the simple, general message generated the most interest among advisors. Our results indicate that the four targeted appeals about sustainability did not resonate nearly as well. In fact, more targeted content appeared to backfire. The diagram below shows the results of our experiment.

The click rates for the general messaging were the highest at about 7.5%. That’s almost twice the number of click rates as the next highest topic. The difference in click rates between the general messaging and the rest was statistically significant, at 95% confidence level. Also, the click rates between each of the targeted appeals were statistically indistinguishable from one another, suggesting that none of them resonated better with advisors relative to the others.

This indicates that careful analysis and experimentation in the field is necessary to craft content about sustainability that truly resonates with advisors. Prior research showing that advisors are disinterested in sustainability should not be treated as a given. With the right messaging, advisors could actually be quite interested. 

What does this mean for advisors interested in incorporating sustainability into their practice?

For professionals in the sustainable investment industry, how you talk about sustainable investing matters. A general introduction can be effective, but there is much more we can do to understand how to talk about sustainable investing with advisors.

It is not that advisors are disinterested in sustainable funds, but that the industry’s common messaging may not resonate with them. Most importantly, the “advisor gap” in sustainable investing could very well be a myth.

Investors’ interest in sustainable funds shows no sign of abating. Moreover, the two most interested parties—women and millennials—are vastly underrepresented in investing. As women and millennials continue gaining space in the world economy, sustainable funds will only grow in importance—making it essential that advisors feel comfortable working with these types of investments or risk losing potential clients.

Closing this information gap between advisors and sustainable investing is necessary for both advisors and the institutions who support them. 

Ready to get started? Read more about the benefits of incorporating ESG into your practice.