Millennials Are a Driving Factor in the Growth behind ESG Investments

The millennial generation is helping to popularize sustainable investing and investments that incorporate environmental, social, and governance principles.

Millennials fueled growth of sustainable investing throughout the 2010s, contributing $51.1 billion to sustainable funds in 2020, compared to less than $5 billion five years ago, CNBC reports.

“Nine times out of 10 if you ask people, ‘Do you want to invest in a way that leaves a positive mark,’ they will say yes,” Harlin Singh, head of sustainable investments at Citi Private Bank, told CNBC.

Concerns over climate change have been an especially large driver of growth. About 76% of older millennials indicate that climate change poses a serious threat to society, according to a survey conducted by The Harris Poll on behalf of CNBC Make It.

The survey results also revealed that one-third of millennials often or exclusively use investments that take ESG factors into account, compared to 19% of Gen Z, 16% of Gen X, and 2% of baby boomers.

Outsized millennial interest does not mean that other demographics aren't looking into ESG investments. According to Morningstar data, 72% of the U.S. population “expressed at least a moderate interest in sustainable investing,” and the preference didn’t change significantly between the different generations.

Bill McManus, managing director of applied insights at Hartford Funds, attributed the varying degree of interest between the demographics to availability and access of ESG investments. Millennials have matured and hit more of an investment age at the same time that ESG investment options started to hit the financial scene.

In 2019, almost 500 actively managed U.S. funds included ESG criteria in their prospectuses.

Millennials also have more access to sustainable investment information through simple internet searches. Their portfolios are also more "nimble," whereby they don't have as much money committed to any single area.

“People of every generation have been passionate about issues. Go back to the ’60s, there was intense focus on social injustice issues,” McManus told CNBC. “But now we have the ability to align our investments with things that are important to us.”

For more news, information, and strategy, visit the ESG Channel.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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