In the final part of our millennials campaign, we explore one route of investment that has proven particularly appealing to today’s Generation Y – Socially Responsible Investment, or SRI.
SRI is an investment discipline that considers environmental, social and corporate governance (ESG) criteria to generate long-term competitive financial returns and positive societal impact. With social and environmental change happening faster than ever, there is a growing number of investors seeking investments that not only generate profits but have a social impact too. Sustainable investing has long been regarded as more of a philanthropic pursuit, putting positive impact ahead of profit, but it seems that investors attitudes may be shifting as they realise they can have both.
Schroder’s Global Investor Studies for 2016 and 2017 revealed that 67 percent of UK investors had cited sustainable investing as being important to them, with more than half of millennials saying that they were already investing sustainably. This was further supported by Schroders 2017 Global Investor Study of 22,100 investors across 30 countries, which found that the majority of respondents viewed sustainable investing as a way to generate returns, and not just provide positive impact.
The chart below shows investors’ average responses when asked whether they invested for potential profit or for social/environmental impact in six different types of sustainable funds or ways of investing. Investors were asked to rate their choice from 1 to 5, where 5 was more for profit and 1 was more for social impact. Anything above a 3 meant investors were leaning towards profit.
The six categories were:
• Medical science/biotech
• Green technology
• Avoiding oil, gas or coal companies
• Positive social impact
• Improving how companies are run
• Improving diversity
As the chart shows, the average across all six was 2.93, meaning that investors were equally likely to choose sustainable investing as a path to better potential returns as they were for its probable positive impact on the world.
Nathan Mead-Wellings, Director at Finura, said: “We have witnessed a strong rise in the volume of ESG funds that have been launched over the past twelve months, from firms such as BlackRock and Barclays for example, which we feel demonstrates a recognition of the fact that investors are keen to see their money making positive social impact at the same time as generating returns. It comes as little surprise to us that millennials are the driving force behind this growth, as it is this generation that has biggest concern for the future of our planet.”
With millennials set to inherit £1.2 trillion over the next 30 years, it looks like the SRI industry can continue to combine potential investment returns with positive social impact for our Gen-Y investors.
In an article published by Money Observer, here are three of top growth opportunities for sustainable investment that were identified (as of 22nd February 2018).
As technology is maturing, governments continue the bid to phase out petrol and diesel cars. By 2030, it is estimated that up to 40 percent of the world’s cars will be electric, versus the 1% globally as of today. Aside from industry leaders such as Tesla, there are several other electric car component manufacturers that can be invested in.
Despite the call for more paper packaging and the 5 pence charge that was imposed on plastic carrier bags, we still only collect 14% of our plastic packaging for recycling. That said, as we all become more aware of the impact our ‘throw away’ culture has on the planet, a number of innovative new companies are launching that focus on new recyclable and biodegradable packaging options as well as improved recycling infrastructure and deposit schemes.
These new software programmes aim to help us improve our energy consumption to both save us money and benefit the word’s dwindling resources. One example is in agriculture, where software can help farmers to more accurately assess their fields to ascertain the amount of water or pesticide needed. This enhances the yield of the field, while decreasing pollution.
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