Why many young ESG investors also own cryptocurrencies

Students participate in the Global Climate Strike march in New York City.

Johannes Eisele | Afp | Getty Images

As the bull market flourished in 2021, many investors took a shine to investments that reflected their values.

Environmental, social and corporate governance — or ESG — investments attracted record levels of new assets. Last year, U.S. sustainable funds attracted almost $70 billion in 2021, a 35% increase over the previous 2020 high, according to Morningstar.

Yet despite record growth, ESG funds have not yet reached mass adoption, according to new research by Betterment. To find out who is and isn’t investing in ESG and why, the firm recently commissioned an online survey of 1,000 investors who hold taxable investments.

Who loves ESG investments, and who doesn’t

More than a quarter of respondents — 26% — said they currently own some kind of ESG-themed investment. Of those respondents, 59% have held those investments for more than a year.

Notably, the survey also found 80% of investors who hold ESG-themed investments also have money in cryptocurrencies.

ESG investors are more likely to belong to younger generations, with 54% of Gen Z and millennials holding these investments. That compares to 42% of boomers and 25% of Gen Xers.

Many respondents — 46% — said they have not sought ESG investments, but are interested in them.

Meanwhile, a majority of those who were not interested — 51% — said they do not feel they understand ESG investments well enough. Another 27% are concerned their returns may suffer if they invest in this area.

ESG versus crypto — a conflict of values?

Will market worries hurt ESG enthusiasm?

As markets drop, just how well investors perceive ESG funds as helping them reach their goals may be a factor as to whether they can sustain their recent growth.

When Betterment asked how willing survey respondents would be to sacrifice performance to achieve their ESG goals, 17% said they were very willing, 16% said they were willing and 25% said they were somewhat willing.