Exploring factors that influence social retail investors: Evidence from Desjardins Fund - Dominique Diouf, Tessa Hebb, and El Hadji
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Carleton
Centre for
Community Innovation
Exploring factors that
influence social retail
investors: Evidence from
Desjardins Fund
Dominique Diouf, Tessa Hebb,
and El Hadji
WP 13-01Exploring factors that influence social retail investors: Evidence from Desjardins
Fund
Dominique Diouf, Laval University, Quebec (QC), Canada
Tessa Hebb, Carleton Centre for Community Innovation, Carleton University, Ottawa (ON), Canada
and El Hadji, University of Montreal, Montreal (QC), Canada
Executive Summary
Until now most studies on the choices, motivations and behavior of investors consist of a
segmentation focused on socio-demographic characteristics such as age, income, education
level etc. Even though more researchers attempt to explore other factors such as those related
to psychological aspects or social values, it should be noted that they do not always take into
account the multidimensional nature of the observed phenomena.
This paper argues that to understand the behavior and choices of SRI investors we must
consider social investors as complex individuals in order to understand the characteristics and
behaviors of individual social investors in relation to those of conventional investors
We must also take into account the influence that the institution may exercise (thanks to the
role of SRI advisors and the other strategies for promoting socially responsible investment).
Our research builds on the theory of complexity framework.
Our research provides evidence from focus Desjardins Fund, with data gathered by Desjardins
from online surveys: Desjardins Panel (2010), a web-based survey on perceptions relative to
socially responsible investment (2008), and Desjardins Panel (2012). We subjected the data to
bivariate and multivariate analysis. We segmented the market into Sociéterre portfolio holders
(the Desjardins SRI fund); Diapason portfolio holders (a Desjardin traditional investment
portfolios); and those who hold both Diapason and Sociéterre portfolios.
Our results show that while demographic characteristics still remain important in understanding
the behavior and attitudes of social investors, it is their social values, environmental, social and
governance (ESG) issues, financial return considerations and the role played by the institution
that are significantly associated with socially responsible investment of the portfolio.
Our research revolves around the following questions:
- Are there distinguishing characteristics that are associated with those who choose SRI
products? Can we find a common indicator for SRI choices?
- What are the common demographic characteristics (age, gender, geography, profession,
income, education, etc.)?
- Are there common attitudinal (values-based) characteristics?
- Is awareness of environmental, social, and governance issues a determining factor in
decisions on SRI investment?
- What are the expectations and both in terms of ESG values and financial returns?
1Carleton Centre for Community Innovation Diouf, Hebb and Hadji
- What are the gaps and trade-off between the ethical and ESG issues and the financial
return?
- What is the role of advisor in SRI investment selection?
- What theoretical and practical implications can be drawn from the results of this study?
We explore 5 hypothesis in the research:
1: Although socio- demographic aspects help determine certain characteristics of social
investors, they are not, however, significant when associated with other variables.
2: Social values related to environmental, social, and governance issues guide people's
choices in SRI.
3: Even if they put forward their social values, social investors are still interested in portfolio
returns. The investor profile explains the level of importance given to returns.
4: The more the attitudes are favorable to SRI, the more investors tend to choose SRI
products.
5: The institution influences the choices in SRI.
a) Information sources (advertising, TV, etc.) are important tools for promoting
responsible investment and influence decisions making.
b) The investment advisor strongly influences investment decisions.
We selected 14 variables for our analysis.
Age
Gender
Education
Occupation
Household size
ESG
issu
es ESG Profile
Tra SRI holding
Investor Profile
de- 0.No
Expected annual return
offs 1.Yes
Atti Satisfaction for the product
tud Recommendation of the product
es
Inst
itut Sources of information (role of
ion advisor)
Knowledge of the product
Level of product knowledge
Investment management style
2Carleton Centre for Community Innovation Diouf, Hebb and Hadji
Findings
Of the 893 participants in the survey, the majority are Diapason portfolio holders (90.4%);
Sociéterre portfolio (SRI) holder’s are just 12.5% ; while the holders of two portfolios (and
Diapason and Sociéterre) are only 2.9%.
47.6% of the sample are «interested» in ESG; followed by «warm» (31%), «enthusiastic» (14.6%)
and «reluctant» (6.9%).
Those who are about ESG as opposed to reluctant or weak on ESG tend to hold
a Sociéterre portfolio (33.8%), while those who are only warm to ESG tend to hold a Diapason
portfolio (98.2%).
These results indicate an important difference between the characteristics of the SRI portfolio
holders and those of traditional portfolios. In more concrete terms, the higher the awareness of
environmental, social and governance issues, the more they tend to invest responsibly. ESG
factors are determining factors in socially responsible investment and also highlight the
importance of the context.
People who have heard of product through advertising or articles (TV, newspapers, journals) are
more likely to hold a Sociéterre portfolio (57.1%). People who have heard of the product
through friends, acquaintances or relatives are more likely to hold a Diapason portfolio (95.7%).
For those who hold the two portfolios, they have mostly heard about the product through
advertising or articles (9.5%).
People who feel that the advisor knew a little about the Sociéterre product are more likely to
hold a Sociéterre portfolio (25.5%). Though the overwhelming number of people in the survey
held the Diapason portfolios regardless of the level of knowledge of the advisor. These results
show the importance of the need for institutions to develop strategies to promote SRI products.
People whose indicate their investment management style is "autonomous" are more likely to
hold a Sociéterre portfolio (20.2%). In contrast, people who talk to the advisor and make
decisions together are more likely to hold a portfolio Diapason (92%). The above explanations
on the differences between the holders of SRI portfolios and those of traditional investment
portfolios can be useful in understanding the investment management style. The fact that
holders of SRI portfolios are younger and educated may help explain this difference. In other
words, compared to traditional portfolio holders, they may be quicker to use the Internet and
other means to find the information that enables them to manage their investments
independently.
When presented with a case of equal financial performance between the Sociéterre portfolio
and the Diapason portfolio, almost all Sociéterre investors choose the SRI option. Similarly more
than 85.2% of them would choose SRI with a yield of 1% lower than that of the classical
3Carleton Centre for Community Innovation Diouf, Hebb and Hadji
investment. We notice that 17% of Sociéterre investors would choose SRI even with a yield of
10% lower than that of the classical investment.
However, it should be noted that the percentage of Sociéterre respondents who reported
"Don't Know" increases gradually as the difference between the yields increases. It rose from
0.4% in the case where yields were equal to 39.4% assuming a yield of SRI 10% lower than that
of conventional investment. The percentage of investors who chose SRI decreases depending on
whether the difference between the performance of SRI and that of the conventional
investment increases.
Using multivariate analysis we find people enthusiastic about ESG are 66 times more likely to
hold a portfolio Sociéterre those reluctant about ESG.
Similarly, respondents who heard of the product by advertising and news article are 8 times
more likely to hold a Sociéterre portfolio than respondents who contacted their advisor.
Respondents who have heard of the product via Internet are eight (8) times more likely to hold
a portfolio Sociéterre than the respondents who have contacted their advisor.
4You can also read
