A new generation of investing brings a new generation of investors. A recent survey across the global community revealed that adaptability and passion for social change are the most critical qualities in investors of the next ESG era.
As we prepare for this period of change, millennial and Generation Z are coming of age, and so is their capital. Do they have the skills – and the desire – to bring sustainable investing to the next level?
New generations coming of age
It’s predicted that millennials – those born between 1981 and 1996 – make up around 23% of the world population. As they enter their thirties, their age group is estimated to have a collective spending power of US power of $1.4 trillion. Generation Z – born between 1997 and 2012 – have already racked up a heavy hitting US $140b.
These new generations are equipped with the tools to take sustainability to the next level. Digital natives, they have data at their fingertips, and the online platforms to put it into action. And during the pandemic, with travel plans cancelled, work gone remote, and school suspended, they are conquering the digital landscape. During the third quarter of 2020, robo-adviser StashAway reported a 3.6 times year-on-year increase in Gen Z investors, a 63% jump from the previous quarter. They are high in screen time, risk appetite, and brutal honesty: as 23 year old investor Tan Cai Jin states “we are young, we can afford to take higher risks, because we have time to earn (the losses) back”.
As millennials and Gen Z get more serious about investing, they are also getting serious about its impact. Millennial investors are “twice as likely” to invest in companies or funds that target specific social or environmental outcomes, and around 95% want their investments to align with their sustainable values.
Caring Rich Asians
Nowhere is this more prominent than in Asia, where they are setting the pace for giving back. In a recent survey, 86% of young Asian investors believes they had the opportunity to tackle societal issues through investing, compared with 67% in the West. 54% claimed they aligned current investments with value-based goals, compared to 47% across their Western counterparts.
Part of this could be because Asia has the capital to drive change. Maybank’s regional Head of Retail, Lok Eng Hong, explains that across ASEAN, “what is common” is Gen Z receiving initial funds from their parents that help kickstart their investing career. It’s the caring side of the Crazy Rich Asian culture. Singaporean rich kid, Kane Lim, star of extravagant recent reality hit Bling Empire, boasts an investment portfolio that includes wellness and renewable energy.
Financial and emotional investment
But as skinny jeans, side-parts and Tik-Tok tussles have recently proven, it’s a mistake to gild millennials and Gen Z with the same brush. While the rise of impact investing started as millennials are maturing as investors, Generation Z are just at the start of their investing journey. Raised in a climate of economic uncertainty, they are more financially cautious. They are debt wary, and many are already starting to think about retirement.
While both generations invest according to their values, millennials are twice as likely as the general population to invest in funds focused on social or environmental causes. 72% of Gen Z’ers are hopeful that responsible investing could improve sustainability outcomes, compared to an idealistic 86% of millennials who have placed their faith in impact investing to make a difference.
Perhaps it comes down to pragmatism. Generation Z wants sustainability “that’s actually attainable and not overly polished”. They are likely to be more discerning in their portfolio choices: clear ESG metrics and data need to be established to show actionable ESG results. Organisations should also tap into content and media platforms that resonate with this up-and-coming generation of investors.
Timeless, ageless investing
Before we know it, all eyes will be on the next wave of young upstarts, shifting the markets to align with their values. Youth is fleeting, but new technologies, and environmental commitment seem here to stay: a recent report across Singapore schools showed a 50% increase in uptake in students signing up for sustainability programmes.
Age is just a number. And as the survey shows, when it comes to defining the next era of ESG, the qualities of the investor make more of an impact than when they were born.
Trends may be generation-led. But agility and passion for change are ageless.
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