Millennials Opt For More Responsible Investing

Lisa Smith, BA (Hons), CeFA
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Eight out of 10 millennials are in favour of socially responsible investing, says a new global survey.

Young adults aged between 20 and 40 years old are making environmental, social and governance (ESG) investing  a priority when choosing investments.

While the goals of traditional investing are still important, such as risk, profits and likely returns, revealed the research by deVere Group, one of the world’s largest independent financial advice firms.

deVere CEO and founder, Nigel Green, said: “This survey underscores that traditional factors – such as anticipated returns (10%), past performance (7%), risk tolerance (4%) and tactical allocation (2%) – are important when millennials make investment decisions, they are no longer enough on their own.

“ESG considerations now sit at the heart of that process.”

What is ESG investment?

He also explained what ESG stands for –

  • 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.

“Millennials 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,” said Green.

“They might be right to do so, too.  Research has shown that investments that score well in terms of ESG credentials often out-perform the market and have lower volatility over the long-run.”

“For this reason and, importantly, because the biggest-ever generational transfer of wealth – likely to be around $30trn – from baby boomers to millennials will take place in the next couple of years, ESG investing is set to grow exponentially in the 2020s.

Not just a buzz word

“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 pile into ESG over the next few years.”

Green also explained ESG is an integral part of the investment process for millennials and not just a buzz word.

“Environmental, social and governance issues are now the top priority for millennials,” he said.

“They understand that it is perfectly possible – and increasingly necessary – to make a profit while positively and proactively protecting people and the planet.

“These principles will fundamentally reshape the retail and institutional investment landscape in the next decade.”

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