Originally Published on Mashable.
Financial experts are keeping a close watch on millennial investment data to gain insight into what this generation cares about and how it affects their long-term choices. According to a UBS Investor Watch report, millennials are optimistic about achieving their financial goals — even though they tend to invest conservatively. They also express interest in sustainable investments. This suggests that they’re more likely to put financial support behind initiatives that generate environmental, social, and governance results.
When it comes to millennials’ value systems, findings suggest this generation is more philanthropically minded than its reputation might imply. Studies have found results about millennial core values that include a prioritization of civic duty and diversity, as well as a tendency to view themselves as members of a global community. They also appear to display greater concern for protecting the environment than do previous generations. In addition, the UBS Investor Watch report found that millennials often prioritize long-term financial considerations such as retirement planning or caring for aging parents. This data flies in the face of the stereotype of millennials as self-centered, short-sighted, and entitled.
Millennials seem predisposed to make investments that reflect their personal values. Here’s a look at why sustainable investing may be attractive to this often misunderstood generation.
Sustainable investing — and why it matters
Millennials’ moral compasses may play a role in defining their financial habits. A recent UBS whitepaper outlines a few key findings regarding millennial spending: One trend is that they place emphasis on backing socially responsible organizations, both philosophically and financially.
Millennials also appear willing to align their investments with companies that display greater corporate responsibility. The whitepaper points out that millennials are nearly twice as likely to check product labeling for sustainability criteria than are other age groups. Investors under the age of 35, too, are twice as likely to sell an investment if it is associated with a company that displays “unsustainable” behavior.
Not only are millennials more inclined to work for or buy products from organizations with a social good component — they’re also more likely to invest in such companies in the long-term. According to research, almost half (49 percent) of millennials with a net worth of more than $1 million say that social responsibility is an important factor in choosing investments. This is a greater percentage than any previous generation.
Given millennials’ tendency to view themselves as global citizens, it makes sense that they appear more likely to use private capital for public good. And thankfully in today’s investment landscape, investors no longer have to choose between supporting noble causes and generating financial return. Sustainable investing provides a potential solution to both social responsibility aspirations and financial returns.
Such investments include backing initiatives that support meaningful environmental or social change. For instance, companies and entrepreneurs that are part of UBS’ Global Visionary program, which recognizes organizations and individuals who endeavor to improve the planet. A couple of companies that fall into this category include Canopy, a non-profit dedicated to protecting the world’s forests and supporting indigenous communities, and CrossBoundary Energy, a renewables organization that provides solar power to companies throughout Africa.
Sustainable investing shows no signs of slowing down. Data suggests that the practice will grow significantly over the next five years as millennials’ net wealth continues to mount. UBS expects the percentage of investors who back sustainable ventures to climb from 39 percent to 48 percent globally. What’s more, the same UBS study found that a full 58 percent of investors expect sustainable investing will become a “standard approach” in the next decade.
All of this bodes well for businesses beyond those that sell avocado toast: Industries ranging from renewable energy organizations to social good enterprises stand to benefit from this influx of investment in the coming years. As millennials contribute more of their wealth to sustainable solutions, this generation is prepared to put their dollars where their values are — and potentially make the world a better place in the process.
The value of investments can go down as well as up. Your capital and income is at risk.
ESG/Sustainable Investing Considerations: Sustainable investing strategies aim to consider and in some instances integrate the analysis of environmental, social and governance (ESG) factors into the investment process and portfolio. Strategies across geographies and styles approach ESG analysis and incorporate the findings in a variety of ways. Incorporating ESG factors or Sustainable Investing considerations may inhibit the portfolio manager’s ability to participate in certain investment opportunities that otherwise would be consistent with its investment objective and other principal investment strategies. The returns on a portfolio consisting primarily of ESG or sustainable investments may be lower or higher than a portfolio where such factors are not considered by the portfolio manager. Because sustainability criteria can exclude some investments, investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria. Companies may not necessarily meet high performance standards on all aspects of ESG or sustainable investing issues; there is also no guarantee that any company will meet expectations in connection with corporate responsibility, sustainability, and/or impact performance.
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Originally Published on Mashable.