U.S. investors are more willing to sacrifice returns in favor of impact

A growing number of U.S. investors say they are willing to sacrifice returns in order to create a positive impact with their money, a new survey finds.

American Century Investments, a global asset manager with $240 billion under management, said in its annual impact investing survey that 40% of U.S. investors would give up some returns in order to have an impact. Among countries represented in the survey only Singapore, where 47% of investors agreed on the returns vs. impact question, scored higher.

Of those who are interested in impact investing, 67% would sacrifice up to 10% of returns to create a positive impact, with 6%-10% the most common range.

The percentage of Americans who were willing to make that sacrifice was the highest since the question was first asked in 2020. In the previous survey, 36% of U.S. investors said they would make that trade off.

Only 33% of U.K investors, 31% of German investors and 29% of Australian investors said they were willing to sacrifice returns for impact. And even though Singapore had the largest percentage agreeing with that sentiment, the overall number was seven percentage points less than in the previous survey,

“A willingness to give up as much as 10% of an expected return shows that impact investors expect to earn competitive returns and are making rational choices to realize an impact emphasis in addition to a financial return,” Sarah Bratton Hughes, senior vice president and head of sustainable investing for American Century Investments, said in a press release.

But she noted that as impact investing has evolved, the return vs. impact equation is changing.

“In its earliest forms, impact investing often accepted lower expected returns to have a bigger impact, but our impact investment strategies emphasize sustainability-related attributes or outcomes in addition to delivering a financial return. Identifying impact-related factors that could affect a company’s ability to stay competitive over the long term has the potential to add to returns,” she said.

Investors losing interest in impact

The appeal of impact investing in general, though, is declining, the survey showed. Fewer investors in  Australia (-6%), Singapore (-5%), the U.K. (-5%), Germany (-4%) and the U.S. (-1%) found impact investing attractive in the current survey.

The decline is also seen across generations, where appeal among Baby Boomers (-8%) has seen the greatest decline, followed by Gen Z (-7%), Gen X (-5%) and Millennials (-1%).

“In the seven years of impact investing studies we’ve done, it’s unique to see such uniform results across nations and ages in a single question, like we see this year with the decline of the appeal of impact investing. Even though the decline holds for all groups, the reasons are more varied,” said Bratton Hughes.

Market conditions have a negative impact on the willingness to allocate to impact investing for roughly 3 in 10 investors in each of the five countries, although in Singapore, respondents were more likely to say market conditions positively impacted their willingness to make these investments. In the U.S., greenwashing and the sustainability backlash both influenced interest in impact investing at higher levels than the prior year.

Another factor could be where investors’ attention is focused. For the first time since the 2020 survey, health care is the top concern of respondents, with the environment falling to second place after holding a lead over health care in 2020 (4%), 2021 (5%) and 2022 (1%).

Read more: A conversation with the Calamos sustainable investing team.