A survey by The Co-operators Group Ltd. suggests most Canadians believe products and services from companies that embrace sustainability cost more, but few would be willing to pay an additional price to be more green.
The Guelph-based insurance co-operative surveyed 1,500 adults, finding almost three-quarters (73 per cent) believe sustainability is important and 62 per cent see supporting sustainable companies as important.
But while just under half of respondents (48 per cent) said they care about sustainable investing, only 23 per cent would pay a premium for sustainable investment products.
That is a “misperception” around the high cost of sustainable business that Co-operators has been trying to address during November, which is deemed Financial Literacy Month.
“We know that in the context we’re in right now — there are many challenges for Canadians that are related to finances — our sense was that there may be some opportunities to better understand that situation, and in particular some of the misconceptions and barriers that might exist to more sustainable investing,” Chad Park, vice-president of sustainability and citizenship at Co-operators, told Sustainable Biz Canada in an interview.
Taking on the ESG investing gap
Co-operators contests the notion that sustainability costs more, pointing to the performance of sustainability-oriented funds.
“From the investment world there’s all kind of studies that show that we no longer have to sacrifice performance, or to pay more, for more sustainable investments,” Park said.
In an email follow-up, Co-operators also pointed to research that found ESG investments perform just as well or better than their non-ESG counterparts. Morningstar research from 2023 suggests Canadian sustainable funds have “essentially the same fees as traditional funds” when looking at median asset-weighted management expense ratios.
Almost 24 per cent ($2.69 billion) of Co-operators’ investment portfolio had been allocated to impact investing as of the end of 2022. Park said this shows Co-operators is not “sacrificing financial return for the sake of our greater sustainability commitment — the environmental, social, governance outcomes that arise from our investments.”
There is also a non-financial benefit to ESG investing, he said. If less capital flows to sustainable funds, there is less investment in the solutions to environmental challenges and a missed opportunity to align one’s values with their investments.
“It’s a missed opportunity to future-proof our economy or de-risk our economy from climate change,” Park continued.
How to interest Canadians in sustainable investing
The Co-operators survey found a disconnect between the interest in sustainability and the desire to invest sustainably.
Though most Canadians said sustainability is important, 48 per cent said they wished to learn more about the ESG/sustainability of the companies or funds they invest in. Only about three-in-10 (29 per cent) would invest sustainably if the returns were not as promising as non-sustainable options.
Lack of knowledge about ESG investing is a major impediment, Co-operators found.
Twenty-six per cent said they know how to access information about the ESG/sustainability performance of the companies or funds in which they invest.
Another issue is the burden of the high cost of living. Over half of respondents (53 per cent) said they were interested in supporting sustainable companies before rising inflation, living costs and interest rates "made things too expensive."
Canadian investors can educate themselves on sustainability by reviewing ESG reports published by companies they are considering for investments, Park said. He also recommended seeking sustainability-focused funds and consulting with an advisor who has expertise in sustainable investing.
“I think the real key is working to empower Canadians with information, education and tools to align their investment strategy with their values and be comfortable in investing in the future,” Park said.