Why millennials are gravitating toward socially responsible investing

Morgan Stanley Graphic on Sustainable Signals

Source: Morgan Stanley “Sustainable Signals,” 2019.

Please don’t hold it against me, but I’m a millennial. I sometimes claim to be Generation X, but there is no denying it … I’m smack dab in the middle of Gen Y, also known as the millennial generation!

While there may be plenty of negative stereotypes associated with my generation, one of our more positive attributes is the widespread interest in sustainable consumer behavior. Sustainable living is something I strive to embody, so it’s intriguing to see this trend in thinking. In the last decade I have noticed a mental shift in my peers – they check food products for sustainable characteristics, purchase clothing and makeup from sustainable brands, seek employment with companies that are sustainably-focused, and practice a lifestyle of limiting their carbon footprint. So, it should come as no surprise that millennial investors want to align their investment strategies with similar standards.

Socially responsible investing (SRI) is the practice of evaluating a given investment or portfolio’s social and environmental impact alongside traditional financial performance metrics. By doing so, investors seek to invest in companies with sustainable business practices, and not support companies that commit social or environmental injustice.

In Morgan Stanley’s 2019 whitepaper “Sustainable Signals,” 85% of individual investors showed some interest in sustainable investing. That’s an impressive number. But what’s even more impressive is that 95% of millennials are interested in sustainable investing. Additionally, 91% of millennials reported that not only do they wish to invest sustainably, but they also want accountability and transparency into those claims. They expressed interest in impact reports that demonstrate both investment return as well as a social and environmental return on their sustainable investments. This is particularly true with environmental issues, such as plastic reduction and climate change, and social issues like gender diversity.

This represents a significant shift in the way that investors think about investing and is only expected to increase as millennials succeed baby boomers as the largest consumer generation, and benefit from the dramatic generational wealth transfer that is already underway.

In the past several years, I have gone down a rabbit hole of certifications, study, and self-exploration. Perhaps this represents a search for deeper purpose and meaning in my vocation. Investment returns are important, but there must be more to it than that…

Is seeking the highest return possible the sole goal of investing?

Maybe to some, but perhaps there is another component to the stewardship of wealth.

My goal as an advisor has always been to educate my clients so that they understand their scope of options. Many clients are interested to hear that they can invest in ways that are aligned with their values, and that doesn’t automatically mean sacrificing long-term yield or performance.

My firm Parsec Financial (with an office in downtown Charlotte) has been thrilled to witness this shift in investor psychology, and we have been working hard to develop an offering to address it. Our new SRI portfolio combines traditional stock selection criteria with numerous environmental, social, and governance (ESG) metrics through one of the industry’s leading data providers, Sustainalytics. Additionally, our SRI portfolio includes a proxy voting, wherein we will vote shares in accordance with an SRI framework and maximize the value of the rights belonging to shareholders.

Morgan Stanley Sustainable Signals Graphic 2

Source: Morgan Stanley “Sustainable Signals,” 2019.

In 2019, 85% of millennials said they believe that it is possible for their investment decisions to positively influence climate change, and 89% reported that their investment decisions can create economic growth that lifts people out of poverty.

The intention that investors can – and will – personally affect positive change through their investment decisions is a new and interesting pattern, and we are honored to do our part in enabling this diligence.

Ashley Gragtmans, CFP®, BFA™, CSRIC™

Financial Advisor

Learn more about me and feel free to schedule time on my calendar to learn more about SRI:https://parsecfinancial.com/team/ashley-gragtmans/

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