Millennials are prioritizing “green investing,” and in doing so they will transform the investing landscape in the coming decade, according to the deVere Group, a global financial services and advisory firm.
More than three-quarters of millennials (77%) are placing a priority on socially responsible and impact investing, according to a globall a deVere Group survey of 1,125 millennials worldwide. The majority of millennials, those people born between the early 1980s and the early 2000s, cite environmental, social and governance (ESG) investing as their top priority.
“These principles will fundamentally reshape the retail and institutional investment landscape in the next decade,” said Nigel Green, deVere CEO and founder, in a statement. “Millennials understand that it is perfectly possible—and increasingly necessary—to make a profit while positively and proactively protecting people and the planet.”
He added that traditional factors still play a role in millennials' investment decisions—factors such as anticipated returns (named by 10% of millennials as the top priority in investing), past performance (named by 7% of millennials as the top priority) and risk tolerance (named by 4% of millennials as the top priority). But these factors are no longer enough, he said. “Indeed, ESG considerations now sit at the heart of that process.”
Environmental concerns, as defined by deVere, include issues such as climate change policies, carbon footprints and the use of renewable energies. Social issues are such things as workers’ rights and protections. Governance issues include executives’ compensation, the diversity of corporate boards of directors and corporate transparency.
Studies by other organizations have shown that taking ESG factors into consideration does not hurt the bottom line of a company, and in some cases can improve it, because these considerations take some risk out of corporate operations.
For instance, As You Sow, a socially responsible investing advocacy organization, said in a recent report, “Companies with strong commitments to public and environmental health and sustainability increase their long-term value and stability and reduce the potential for costly litigation, unanticipated regulatory changes and reputational damage.
“Millennials appear to be leading the charge in socially responsible and impactful investing,” Green said in the statement. “They are keen to look for investment solutions that are progressive and forward-looking, and they might be right to do so, too. Research has shown that investments that score well in terms of ESG credentials often outperform the market and have lower volatility over the long run.”
The transfer of wealth from baby boomers to millennials, it has been estimated, could reach $30 trillion dollars, and that puts ESG investing in a position for exponential growth in the new decade, deVere said.
“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, to pile into ESG over the next few years,” Green said.