More than three quarters of people agree that sustainable investing is more important than it was three years ago, while 78% anticipate it will be more important three years from now. In the U.S. assets managed with sustainable investing criteria has already increased more than 135% since 2012. (2)
This attitude coincides with Millennials becoming the largest generation in the world’s workforce in 2016, and in 2017, becoming the generation with the most spending power. A generation also thought to be the most purpose driven generation ever when it comes to spending their money.
According to research conducted by Morgan Stanley in 2015, 86% of Millennials said they are interested in socially responsible investing. Similarly, 86% of respondents in Deloitte’s Millennial Survey 2017 believe that the success of a firm should not be judged purely with regards to financial performance. A survey by Standard Life Investments (2016) shows that nearly 70% of 25–34-year-olds were concerned about social and environmental issues as much as returns when investing.
Its these investors that are bringing increased attention to sustainable, responsible and impact investing as many look to make money and do good, by seeking positive social and environmental impact alongside positive financial returns.
Overcoming the perception that positive change comes at the cost of performance.
Millennial interest in sustainable investing comes at a time of increasing evidence of the positive performance potential in these types of investments.
A 2015 study from the Institute for Sustainable Investing found that investing in sustainability has usually met, and often exceeded, the performance of comparable traditional investments, both on an absolute and a risk-adjusted basis, across asset classes and over time. An example of this in action are the findings of the Carbon Clean 200 report, Q3 2016, which ranks the largest publicly listed firms worldwide by their total clean energy revenues. The companies on the list were found to be outperform their more polluting counterparts by as much as three times.
The 2015 study showed a lower level of volatility for companies that score well on ESG, as they tend to be less vulnerable to negative headline risks, large-scale lawsuits or environmental risks. Another reason according to Bryce Doherty, UBS’s Head of Global Asset Management, is that “about 70–80 per cent of a company’s value is represented in non-financial data — the ESG data.” Using it gives you the complete picture of a company’s performance, making it a potentially better indicator of overall performance and risk.
Sustainable investing is part of a bigger movement
Today’s younger consumers now expect brands to go above and beyond when it comes to companies conducting their business in a sustainable and ethical. A new survey conducted by marketing research firm Toluna, shows that 50% of Millennials now actively seek out brands that align to their values. In fact, some reports suggest that 90 per cent of global consumers are now more likely to switch to a brand associated with a good cause.
When looking beyond at consumption behaviour, the rise of sustainable investing is not so surprising. The challenge this generation of ethically minded investors face is how to navigate the complex world of investing to find investments that align to their own personal values.