Support for ESG has plummeted among Millennial and Gen Z investors, typically the strongest backers of environmental, social and governance-related issues, as a more turbulent financial outlook tempers enthusiasm, according to a survey from Stanford University and the Hoover Institution.

Less than half of Millennial and Gen Z investors, those aged 41 and younger, said they were “very concerned” about environmental issues this year, down from 70% in 2022. That same group is also much less willing to give up market returns to meet their social ideals, according to the survey of about 1,000 investors conducted this fall.

Higher borrowing costs helped spur a $30 billion slump in US clean energy stocks over the past six months. Those companies had been seen as likely to flourish with passage of the Inflation Reduction Act, which promises billions of dollars for America’s switch to clean energy.

“This last year was somewhat of a gut check,” said Amit Seru, one of the study’s authors and a professor at the Stanford Graduate School of Business and a member of the Hoover Institution working group on corporate governance. “When interest rates go up, inflation shoots up and people certainly grapple with reality.”

A few years ago, Millennial and Gen Z investors were described by consultants as key drivers of the boom in ESG investing because of their concerns about climate change, as well as gender and racial inequalities. By contrast, conservative investors have led the criticisms against ESG, calling it “woke capitalism” that’s more focused on social concerns than generating profits.

It’s not clear whether the erosion of support is a blip or will be long-lasting, Seru said. The shift puts younger investors more in line with the older investors, those over 58, who continued to express very little concern about ESG topics, according to the survey.

“You’re inherently more liberal when you’re just coming out of college,” said David Larcker, another author of the study and a professor at the Stanford Graduate School of Business. “All of a sudden the bills come due and you kinda go, ‘Yeah, we’re pro this, but we’re not gonna give up everything to push this forward.’”

For example, younger investors claim to be willing to lose between 1 percent and 5 percent of their retirement savings to support ESG causes, while older investors don’t want to lose anything, according to the survey.

This article was provided by Bloomberg News.