One of the most repeated phrases about trends in the world is how much things are expected to change with the full impact of the Millennial generation. Amongst the whole spectrum of different scenarios being built, one that calls everyone’s immediate attention is their potential impact on the global investment sector, as they begin developing their careers, face significant debts, and (hopefully) are beginning to contribute to their 401(k) retirement accounts.
On the surface, there’s no compelling reason for multinationals, institutional investors, fund managers and wealth advisors to pay attention to the Millennial generation – at least until they start inheriting trillions of dollars from the estates of their Baby Boomer parents.
One area where there is a consensus about their interests and focus relates to their new focus on conducting socially responsible investing. Millennials are starting to influence the already existing worldwide growth of impact investing. Companies aligning their financial goals with environmental or social causes and a clear, positive mission are likely to have a lasting advantage over their competitors in attracting capital from value-conscious Millennials.
The 2016 Toniic report “Millennials and Impact Investing” points to the strong linkage between the values of young adults and their investing decisions. Toniic, a global investing forum, and Bank of the West conducted in-depth interviews with a representative sample of Millennials on six continents. Overall, almost 80 percent described themselves as impact investors seeking both financial and social impact returns. Other studies, like the World Economic Forum’s “From the Margins to the Mainstream” report, point to a similar trend toward socially responsible investing. That study found that 36 percent of respondents said that “to improve society” should be the top priority for businesses.
Finally, it seems clear that Millennials will continue to drive the impact investing trend in markets around the world. While financial performance will continue to matter, companies will increasingly be evaluated by their social and environmental returns as well.
At this point, it is important to note that the trend of impact investing moving into the mainstream is a consistent and growing one. The trend should lead to actions by corporate boards, executives and shareholders, including potentially changing the corporate culture, contributing to new and worthy causes, or communicating social and environmental achievements to the public. They will likely need to get external help in addressing these matters, where “impact advisors” will play an important role.
Because of the opportunity for companies to develop strategies that appeal to impact investors while at the same time helping them deliver superior business performance, Ed Morata has started a consultancy that works with corporations to capture the synergies of doing good while doing well.
Brazilian-born Ed Morata is partner and co-founder of Eneas Alternative Investments, a private equity firm based in Madrid, and President of Lug Healthcare Technology. He has extensive experience in international corporate banking and asset management in Latin America, Asia, Europe and the US. He currently resides in Boston, MA. Follow him on Twitter @EdMorata