November 6th, 2017 by Joshua S Hill
Over three-quarters of Millennial investors are currently choosing to or are interested in investing their finances in socially responsible and impacting investment options that aim to create positive change in the world, according to a new report published by investing platform Swell Investing.
Swell Investing — “an impact investing platform that aims to deliver profit as well as purpose” — tasked Harris Poll with surveying 2,207 US adults aged 18 and over, made up of 436 Millennials aged 18-36, among whom 235 have investments — which I would not suggest is highly representative, but is nevertheless still statistically significant. The survey found that 78% of these millennial investors are currently invested in socially responsible and impact investing options — defined in the survey as “investing in companies that are creating positive change in the world and have strong environmental and workforce policies” — or plan to in the future.
More specifically, 54% of Millennials responded, “I don’t currently invest in socially responsible or impact investing options, but I plan to invest in the future” while 24% confirmed they “currently invest in socially responsible or impact investing options.”
“We find that younger generations have a strong desire to use their dollars to improve the world as well as gain a financial return when it comes to investing,” said Dave Fanger, CEO of Swell Investing. “For some, transparency is a barrier. This is a generation that is deeply curious. They’re highly interested in socially responsible and impact investing, but education around the companies they are invested in is key.”
Swell Investing’s report, Money Meets Morals Study, also found that 49% of Millennials who have investments are not able to name the top three companies in their investment portfolios — which, in my opinion, probably has more to do with the current style of investing than any increase in inattention. Further, Millennial investors were more likely than Gen X investors to be skeptical of socially responsible and impact investments, with 27% saying that they were concerned their money wasn’t being used to back positive companies, compared to only 18% of Gen X investors.
The focus on sustainable and socially responsible investing is not new and has been a growing trend for many years now. Back in March of 2015, the Morgan Stanley Institute for Sustainable Investing published its first Sustainable Signals report which found that 71% of individual investors were interested in sustainable investing, but that 54% believed that it was necessary to choose between sustainable investments and financial gains.
“Millennial investors are on the leading edge of adoption,” the authors of the study wrote, noting that, “compared to the overall individual investor population, Millennial investors are nearly 2x more likely to invest in companies or funds that target specific social or environmental outcomes.”
Fast-forward to August of this year to the second Sustainable Signals report from Morgan Stanley which found that three quarters of investors and 86% of Millennial investors are interested in sustainable investing. While the growth from the 2015 report to 2017 might seem insignificant, Millennials who considered themselves ‘Very Interested’ increased from 28% in 2015 up to 38% in 2017 — an increase that Morgan Stanley considers a “statistically significant change.” Unfortunately, 53% of investors still believe that sustainable investors requires a financial trade-off.
A separate survey of 22,000 investors from across 30 countries conducted by Schroders in September similarly found that sustainable investing is on the rise across the globe, with 78% of those surveyed now considering sustainable investment of more importance than only five years ago, and 32% considering it “significantly” more important. Unsurprisingly, from what we’ve already seen, 86% of Millennials considered sustainable investing of more importance than previously, compared to 79% of Gen Xers and only 67% of Baby Boomers.
“It is extremely encouraging for us to see sustainable investing is on the rise,” said Jessica Ground, Global Head of Stewardship at Schroders in September. “While profitability remains the central investment consideration, interest in sustainability is increasing — and is especially strong in some surprising areas. But investors also see sustainability and profits as intertwined. They are looking to allocate to companies that are successfully navigating social and environmental change to generate profit and impact.”
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