Millennials have driven the growth of ESG investments. Now all ages are on board
As millennials turn 40 in 2021, CNBC Make It launched Middle aged millennials, a series exploring how the older members of this generation came of age amid the Great Recession and the Covid-19 pandemic, student loans, stagnant salaries and the rising cost of living.
Millennials have a reputation for being values-driven in their approach to their money and their careers.
This includes their investing habits: Millennials has stimulated the growth of sustainable investment throughout the 2010s – investors contributed $ 51.1 billion to sustainable funds in 2020, up from less than $ 5 billion five years ago – according to industry reports. Now, every generation wants to enter.
“Nine times out of 10, if you ask people, ‘Do you want to invest in a way that leaves a positive mark,’ they’ll say yes,” says Harlin Singh, Head of Sustainable Investments at Citi Private Bank.
Sustainable investing, or using environmental, social, and governance factors to determine which companies and industries you want in your portfolio – and which ones you don’t want – can be applied to many social and political issues. . Concerns about climate change, in particular, are one of the main reasons for its growth, according to investment research firm Morningstar.
And 76% of older millennials believe climate change is a serious threat to society, according to a survey conducted by The Harris Poll on behalf of CNBC Make It in March that interviewed 1,000 American adults aged 33 to 40. on various topics.
About a third of millennials often or exclusively use investments that take ESG factors into account, compared to 19% of Gen Z, 16% of Gen X and 2% of Baby Boomers, according to the survey.
But the difference in adoption isn’t due to other generations not being interested in sustainability or investing according to their morals: a 2019 report by Morningstar found that 72% of the US population “expressed at least a moderate interest in sustainable investing,” and that preference has not changed significantly between generations.
Rather, the difference in asset allocation between generations can be attributed to availability and access, says Bill mcmanus, Managing Director of Applied Knowledge at Hartford Funds, a Pennsylvania-based asset manager.
While the first sustainable mutual fund launched in the 1970s, according to Morningstar, millennials have reached their first years of investing at the same time as ESG investing options have become more plentiful than ever before. In 2019, nearly 500 actively managed US funds have added ESG criteria to their prospectuses. Older generations did not benefit from this plethora of options and easy access when they first started out.
Millennials have also grown up with information about sustainable funds available through a simple Google search, and their portfolios are also more “nimble,” meaning they probably haven’t invested as much as older investors yet. It was easier for them to invest sustainably from the start.
“People of all generations have been passionate about the issues. Go back to the ’60s, the focus was on issues of social injustice, ”McManus said. “But now we have the ability to align our investments with things that are important to us.”
Millennials are expected to inherit around $ 30 trillion over the next few decades, says report From MSCI Inc., an investment research firm, the financial industry and US businesses should continue to create more and better sustainable investment options to attract them and their bank accounts.
McManus says the growing awareness of the damage caused by climate change and the increased focus on politics in recent years have led to wider acceptance of ESG investments, regardless of age. The Covid pandemic has also been a wake-up call to many people in every generation, he says, as it has brought to light many existing injustices in society.
But it’s not just about morals, says Citi’s Singh. Given the very real consequences of climate change on businesses and their bottom lines, for example, taking ESG factors into account is just a smart long-term investment, she says.
“All investors over the next two years will be, at the bare minimum, considering climate risks in their portfolios,” Singh said. It is “a trend that is here to stay”.
CNBC Make It will publish more stories in the Middle Aged Millennials series on student loans, jobs, wealth, diversity and health. If you are a millennial older (33-40 years old), stell your story with us for the chance to appear in a future episode.
Check: Meet the middle-aged millennial: owner, in debt and 40