The intriguing investment habits of Millennials confirm the notion that each new generation stamps its own personality on society, without rejecting the ideas of its forbears altogether.
Millennials are typically defined as those born between the early 1980s and the early 2000s. Those Millennials old enough and successful enough to have made significant amounts of money are now, say investment managers, more likely to demand high standards of socially responsible investment (SRI), keen to measure the impact of that strategy and better informed about activities companies are up to. And in a break with previous generations of SRI investors, they have grown as interested in positive as well as negative screening for their investments.
The sense that SRI means a lot to Millennials is reinforced by two new surveys. Standard Life Investments, the £250 billion ($370.52 billion) asset management arm of Edinburgh-based financial services company Standard Life, cited an October poll of 2,057 U.K. residents in a report on Millennials that found that only 39 percent of 18-to-24-year-olds and 35 percent of 25-to-34-year-olds were “more concerned in investing in a company that provides high returns on investment rather than social/environmental issues.” These numbers compare with 47 percent of 35-to-44-year-olds. “The younger you are, the more values you have when you invest,” said Amanda Young, head of responsible investment at Standard Life, at a press conference announcing the results. The company has €2.5 billion ($2.73 billion) in assets under management in what it calls dedicated “ethical and sustainable and responsible” investment funds.
A November analysis of entrepreneurs around the world published by €316 billion BNP Paribas Wealth Management, the private banking arm of the Paris-based bank, found that on average 8 percent of their total assets, including stakes in their own companies, was in SRI, compared with only 4 percent for people over 50. “We often meet ‘Millennipreneurs’ who have invested all their investable assets in SRI, whereas other clients might consider putting a couple of percent in it,” says Rémi Frank, head of ultra-high-net-worth clients at the asset manager. BNP Paribas WM is one of the leading SRI specialists among wealth managers, with €6.5 billion in the strategy.
Investment managers say that Millennial SRI investors are often broadly interested in many of the same causes as older SRI investors. However, many say that the way they use their investments to pursue their ideals is often different.
Eléonore Bedel, SRI and impact investing product specialist at BNP Paribas WM, says Millennial clients in general are as interested in positive screening — investing in companies that they believe behave well — as they are in negative screening, that is, avoiding companies they view as behaving badly. “Millennials are increasingly looking for thematic funds which invest in companies that provide solutions to social or environmental issues, such as sustainable agriculture and energy efficiency,” she says. SRI investment managers say positive screening can also involve looking at the least-worst performers in sectors previously avoided by SRI, such as mining firms that cause the least environmental damage while extracting resources.
Millennipreneurs are also, says Bedel, interested in “impact investing,” private equity SRI that allows investors to measure, precisely, the effect of their investment on society. For example, a 20 percent investment in an employment services company that has successfully helped 1,000 clients equates to getting 200 people into the workforce.
Largely in response to Millennial pressure, SRI managers have also introduced negative screening into sectors once viewed as uniformly good.
Anne-Laurence Roucher, director and head of responsible investing development and coordination at Mirova, the €5.6 billion green investment arm of Paris-based $866 billion Natixis Global Asset Management, cites solar panel manufacturing, which is dominated by Chinese companies. “We can like the product but dislike the way the product is made,” she says. “This is fully in line with the Millennial approach.” The key issue for Chinese solar panel manufacturing, says Roucher, is whether the labor practices meet UN standards.
Roucher makes a striking claim about the sophistication of Millennial investors. Far from being naive, as many of their elders might claim, “Millennials in general are much better informed than older generations seem to be. This is because former generations didn’t have the same access to the Internet, and therefore to information, that the new generation has.”
The sense that Millennials have more information, and demand more information, about SRI concerns is echoed by Patrick Crowe, national director of investment analytics, advice and solutions at New York–based $184 billion BNY Mellon Wealth Management. “One of the biggest changes in financial services is that we’re dealing with a group of investors who have grown up with constant news, available 24/7,” he says. “The challenge is how to deal with investors who are used to instant response and unlimited information.”
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