25 May 2016 /
Sustainable Investment is growing faster than the rest of the financial industry, a statistic confirmed by a recent UBS study. Investors are becoming increasingly aware of their ability to achieve financial return whilst effecting positive change and social good.
In particular, there is real intention and growing commitment towards sustainability from UHNW Millennials (those born between 1980 and 2000). There is an imminent transfer of wealth from Baby Boomers to Millennials and the World Business Council for Sustainable Investment says sustainable investing opportunities generated by this transfer of wealth could total $10 trillion, or 4.5% of world GDP, by 2050.
As part of my role in International Business Development at Sandaire and as a fifth generation member of the Scott family (Sandaire’s founding family), I am delighted to contribute to a series of articles that explore how Millennials are playing a pivotal role in bringing compelling change to the investment management industry by driving demand for sustainability.
As a result of an increasingly global market place, our international economic system has become more interdependent and volatile, than at any other time in history. We live in a hyper-connected world where Facebook has over 1 billion users per day; a Volkswagen emission crisis can significantly hurt the Euro Stoxx, and a referendum in the UK can spook global markets. Consequently, it is becoming clear to corporations and investors alike, that their ability to grow and prosper depends on the health of the societies where they operate.
Sustainable Investors believe that by implementing new strategies of deploying capital they can support this delicate financial ecosystem more effectively and have a positive impact on society at the same time; and not necessarily at the cost of financial performance, as increasing social and environmental awareness does have a positive macroeconomic effect. – see Fig. 1
If only because of their sheer numbers, Millennials believe that their wealth can make a real difference. The Millennial labour force has risen rapidly, now totalling more than 53.5 million in the United States for example. By 2030, Millennials will make up 75% of the global working population.
However, it is more than just scale that places Millennials at the epicentre of the Sustainable Investment movement but rather a new mind-set.
A 2013 U.S. Trust “Insights on Wealth and Worth” report found the following insights, each indicating the increased demand for Sustainable Investment from Millennials:
- 69% of Millennials believe that investments “are a way to express my social, political and environmental values” (vs. 36% of Baby Boomers).
- 61% of Millennials would be willing to accept a lower return in exchange for greater social and environmental impact (vs. 39% of Baby Boomers).
- 72% would be willing to accept higher risk in exchange for greater social and environmental impact (vs. 35% of Boomers).
- Some 69% of Millennials reported that social, political or environmental impacts were considered “somewhat” or “extremely” important in investment decisions (vs. 40% of Boomers).
Similarly, a 2015 survey by Camden Wealth and Oppenheimer Funds exploring “what Millennials want” drew the following conclusions:
- UHNW Millennials have an unambiguous commitment to philanthropy;
- They harbour a strong desire to preserve wealth and have a lasting and positive impact on the world;
- They still value professional advice, but on their own terms. The advice they receive cannot simply address the overall needs of their families. It must also be tailored to their specific goals and objectives.
Millennials create a somewhat interesting puzzle for big banks. Presently, at just about $1 trillion in assets under management, Millennials lack serious buying power. However, when you consider the potential $10 trillion in assets that will transfer from Baby Boomers to Millennials over the next 30 years, it becomes a more urgent conversation. It would clearly be astute for financial institutions to be responsive to Next-Gen investment requirements.
There are significant long-term opportunities for family offices to offer bespoke and highly flexible solutions to wealthy clients looking to invest in this way. In doing so, they may well play a pioneering role in a sustainability movement that is gaining significant momentum.
At Sandaire, we recognise the importance of responsible investing. In an earlier blog article we introduced Bonny Landers, Sandaire’s Head of Sustainable, Responsible and Impact Investment. Bonny has been appointed to assist clients who have a desire to transition their investments toward responsible and sustainable companies.
Coming up in the series, we will share some fascinating stories of Next-Gen investors who are leading the way on sustainability through their own social enterprises.
If you would like to learn more about Sandaire’s services for the Next-Gen, please contact Kydd.email@example.com
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Sandaire is an international investment office delivering tailored solutions for wealthy families and foundations.
We are family-owned and professionally managed, with a 20-year history that provides unique insights into the evolving opportunities and challenges that wealth creates, truly understanding that there is more to wealth than just investment performance.
We know at first-hand that wealth is a very individual thing. We make it our business to simplify the complex nature of wealth so that we can steward and further its potential for our clients.