The Future of Impact Investing
The future of impact investing is in the hands of the younger generation.
We have all heard of millenials and Gen Z as being more socially and environmentally conscious compared to the older generation. According to a Cross Mark Global Investment survey (2018) of high net worth individuals, there is a striking correlation between age and familiarity of investment terms such as value-based, responsible and Environmental, Social and Governance (ESG) investing. 80% of millennials age 23-29 in the survey are aware of the term ESG investing, compared to only 6% in the senior age group (60 years old and above).
Figure 1 above also reveals that the younger generation, on average, have higher awareness of impact investing than the older generation. Furthermore, Cross Mark survey shows that 88% of millennials wants to talk about value based investing with their financial advisor. Individuals in this age group also inquire about their advisors’ personal stance on value based investing. This shows that millennials’ interest in the field stem beyond themselves and into others as well.
Morgan Stanley’s sustainable report seems to support the Cross Mark survey. The report which was released in 2017 surveyed 1000 active individual investors from 2015-2017. It classified the sample into 2 groups: one “somewhat interested” and “very interested” in sustainable investing. The result shows that the increase among the population of the survey is not significant (19% “very interested” in 2015 vs 23% in 2017). However, when we focus on the millennials age group, the differences are significant. Millennials who describe themselves as being “very interested” increased from 28% in 2015 to 38% in 2017, while those who described themselves as “somewhat interested” dropped from 56% in 2015 to 48% in 2017. The report revealed that women of all age groups showed more interest than men in sustainable investing (84% for women vs 67% for men in 2017).
Although, when it comes to taking action, the difference is not significant - men and women are equally likely to integrate sustainability investment in their portfolio (40% for women vs 36% for men in 2017). Millennials are also optimistic when it comes to the outcome of their investment. Morgan Stanley’s sustainability report (2017) disclosed that 75% of respondents believe that ESG investment can influence climate change while, 84% of respondents think that their investment can help lift people out of poverty.
Additionally, according to Jones (2018), millennials is expected to inherit up to $30 trillion from their parents over the next decade. This, combined with a strong interest to make a real difference in the world, indicates that the future of impact investing now rests in the hands of young people.
“While there’s life, there is hope” - Stephen Hawking
It seems the future of the world may not be as bad as some predicted. Millennials and Gen Z are making an effort to turn things around. They have the wealth, the right mindset and the willingness to see through it. In the future millennials will start to dominate the workforce and with that impact investing is in good hands.
By Konlawat Jarrunpattana (Mooky)
CrossMark Global Investment, (2018). Survey Concludes That Only 6% of Affluent Senior Investors are Familiar with ESG Investing. CISION PR Newswire. [Online] https://www.prnewswire.com/news-releases/survey-concludes-that-only-6-of-affluent-senior-investors-are-familiar-with-esg-investing-300732787.html. [Accessed 25th October 2018].
Meredith, J. (2018) Millennials have more money than you think — so expect ESG funds in your 401(k). Market Watch. [Online]. https://www.marketwatch.com/story/millennials-have-more-money-than-you-think-so-expect-esg-funds-in-your-401k-2018-10-23. [Accessed 25th October 2018].
Institute for Sustainable Investing, (2017), Millennials Drive Growth in Sustainable Investing. Morgan Stanley. [Online] https://www.morganstanley.com/ideas/sustainable-socially-responsible-investing-millennials-drive-growth. [Accessed 25th October 2018].