Younger investors want sustainable options around the globe
The demand for sustainable portfolio options among Millennial and Gen Z investors isn’t limited to U.S. residents: Across the globe there is a strong push from younger investors who want environmental. social and governance criteria to be a mainstay of their financial plan, a new study shows.
Almost 73% of Millennials and Generation Z around the world say ESG is important to their portfolios, according to the survey of more than 800 clients of the deVere Group, a financial and asset management company with offices mostly in Europe, Asia and Africa. Those mindsets have been shaped by significant social and environmental challenges, such as climate change and social inequality, the study found.
“This survey is a massive wake-up call,” said Nigel Green, the CEO of deVere Group, in a release announcing the study results.
“Over the next few decades, an estimated $68 trillion will be transferred from Baby Boomers and Generation X to Millennials and Gen Z. “Financial advisers are going to need to adapt their strategies to meet these evolving preferences of younger clients, incorporating ESG criteria into their offerings.”
The results also signal the need for a broader transition in the financial-services industry, Green argues.
“Investment firms must develop and promote ESG-compliant investment products to attract and retain the growing base of younger investors; regulators need to recognize the importance of ESG investments and ensure that regulations support and encourage sustainable investing practices; and companies need to up their ESG credentials if they want to grow in the long-term,” he said.
Yet despite the clear demand for ESG investments, there has been a notable backlash, especially in the United States. Critics argue that impact investing can compromise financial returns by prioritizing social and environmental goals over profitability. Some have labelled ESG initiatives as “woke capitalism,” Green pointed out.
However, the deVere Group’s study shows that these criticisms are not deterring younger investors.
“The high demand for ESG-oriented portfolios among Millennials and Gen Z indicates a growing recognition that financial performance and ethical considerations are not mutually exclusive,” Green said. “As younger generations seem to appreciate, the argument against ESG investing overlooks a growing body of evidence that suggests companies with strong ESG practices tend to perform better over the long term.”
There’s growing consumer and investor demand for companies that demonstrate a commitment to ESG principles. Businesses that align with these values can attract a loyal customer base and enjoy greater investor support. This trend is particularly pronounced among younger generations, who are more likely to invest in and support companies that reflect their values, he said.
“Our experience had taught us that younger generations would be interested in impact investing — but even we were surprised by the extent of their conviction that this study reveals,” Green said.
Read more: U.S. investors will to sacrifice return in favor of impact
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