Millennials and Responsible Investing

We’ve blogged in the past about the different types of responsible investing—socially responsible investing (SRI), environmental, social and governance (ESG) investing and sustainable investing. I’ll use the term responsible investing to encompass all of them. I’d like to focus this blog on how some of the people who make up the millennial generation (those currently in their late 20s and 30s) view responsible investing.

Interest in responsible investing has increased over time, with women and millennials leading the charge1—86% of millennials are interested in responsible investing, compared with 75% of the general investor population. These are investors who believe that a company’s environmental, social and governance behaviors can matter to risk and return. Many of those investors also see responsible and impact investing as a way to vote with their dollars, to financially express their beliefs. That interest has played out in assets—since 2016, assets in responsible investing strategies has grown 38%.2

Positioning responsible investing with investors of different ages

As you engage with millennials on the topic of responsible investing, consider that different social impact ideas can resonate with different generations.3 Older millennials (those in their 30s) generally invest more in clean technology, education and agriculture (as opposed to, say, their Gen X counterparts, whose top sustainable holding is in affordable pharmaceuticals). When working with your millennial clients or prospects, you could ask them about their interest in those topics as a start to your conversation about incorporating responsible investing into their portfolio.

Millennials also feel like they have a lot to learn about investing.4 Only 30% of millennials are very or extremely confident in their ability to make investment decisions. Couple that with the fact that many millennials want a financial professional who is more of a teacher—one who will educate them and customize the investment approach to their needs. Not surprisingly, millennials who work with a financial advisor are typically more receptive to responsible investing.

One other distinguishing difference is millennials tend to be more risk-averse than their older counterparts. Life experiences shape their comfort with and interest in investing. The formative years of millennials were spent living through the global financial crisis. As a response to that, many millennial investors are more risk-averse than, for instance, their Gen X fellow investors whose formative investment years included the bull market of the 90s. Incorporating environmental, social and governance factors (responsible investing) into the investment decision-making process can be a way to reduce risk in portfolios. This fits well with the typical millennial’s aversion to risk. Millennials also tend to spread their assets over multiple advisors and a wide range of products. Here again is another opportunity for you to help them have a total view of their investments and develop a plan to help them reach their long-term investment goals.

The bottom line

Millennials have a strong interest in responsible investing as both a way to live their beliefs and limit risk. They also recognize they have a lot to learn about investing. Enter you—a trusted advisor—who can both educate, develop a financial plan and address their specific preferences in investing.

1 Morgan Stanley’s 2017 “Sustainable Signals” report as an example
2 US SIF Foundation 2018 Trends report
3 The Generation Project, by Oppenheimer Funds
4 Uncertain Futures: 7 Myths about Millennials and Investing, by FINRA and CFA Institute


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