Social and environmental good as well as financial returns
Building wealth for the future is important, but increasingly people want their investments to do more than make money. Investing ethically means different things to different people.
According to a new global survey, almost eight out of 10 millennials now prioritise socially responsible and impactful investing. Environmental, social and governance issues are now their top priority. They understand that it is perfectly possible – and increasingly necessary – to make a profit while positively and proactively protecting people and the planet.
Environmental, Social and Governance (ESG)
Some 77% of millennials – people who were born in the time period ranging from the early 1980s to the mid-1990s and early 2000s – cite Environmental, Social and Governance (ESG) investing as their top priority when considering investment opportunities.
To understand the matters that millennials deem deserving of their investment, let’s consider what the ESG acronym stands for. The ‘E’ is for ‘environment’ and includes issues such as climate change policies, carbon footprint and use of renewable energies. ‘S’ is for ‘social’ and includes workers’ rights and protections. ‘G’ is for ‘governance’ and includes executive compensations, diversity of the board and corporate transparency.
Progressive and forward-looking investment decisions
This survey underscores that whilst traditional factors – such as anticipated returns (10%), past performance (7%), risk tolerance (4%) and tactical allocation (2%) – are important factors in millennial respondents’ investment decision-making, they are no longer enough.
The findings highlight that ESG considerations now sit at the heart of that process. It’s millennials today that appear to be leading the charge in socially responsible and impactful investing. They are keen to look for investment solutions that are progressive and forward-looking.
Investing in sustainable,
impactful business models
A study by Morgan Stanley, which evaluated more than 10,000 funds and managed accounts, shows that investing in sustainability has usually met, and often exceeded, the performance of comparable traditional investments. This is on both an absolute and a risk-adjusted basis, across asset classes and over time.
Additionally, according to the study, when compared with non-millennial investors, millennials are incorporating sustainability not only into investment decisions but overall consumer behaviour, with millennials achieving greater integration of their money and values by seeking personal fulfilment in their careers, applying a global consciousness to purchases, and investing in sustainable, impactful business models.
Responsible investing increasingly becoming mainstream
As responsible investing becomes increasingly mainstream, and millennials become the major beneficiaries of the transfer of wealth, we can also expect institutional investors (such as pension funds, amongst others) to broaden their exposure to ESG over the next few years, with wealth and asset managers seeing a significant influx of investor funds flowing into sustainable investments.
Much has been made of the demographic changes underfoot in each generation, but none more so than that of millennials, who are far from being old enough to retire but have reached working age. They not only have a major influence on consumer trends, particularly in the digital arena, but also disposable incomes that will grow with age and look set to have their own demands and characteristics in terms of financial services.
 Global poll of 1,125 people was carried out by deVere Group 2 January 2020
 Sustainable Signals: The Individual Investor Perspective – Morgan Stanley – https://www.morganstanley.com/sustainableinvesting/pdf/Sustainable_Signals.pdf, accessed 1 June 2016
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.
THE TAX BENEFITS RELATING TO INVESTMENTS MAY NOT BE MAINTAINED.
THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.
PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.
Footnote: Our belief is that all finacial advice should be tailored to your particular needs and situation. The content of the articles featured in here are for your general information and use only; they are not intended to address your particular requirements or constitute a full and authoritative statement of the law. They should not be relied upon in their entirety and shall not be deemed to be, or constitute advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. Please get in touch to meet with us for a full consultation.