A recent study titled Millennials & Responsible Investment conducted by First State Investments and Kepler Cheuvreux, found over 80% of millennials were interested in making responsible investments.
However, what was holding the 540 investors questioned for this study from doing so, was perceived higher fees and lack of knowledge from advisers on the topic of responsible investment (RI).
81%, the majority of respondents, both millennial and non-millennial, wanted more education on the topic of RI and RI products.
This presents an opportunity for those in the industry who see their role as awareness raisers in making responsible investments as a whole more accessible and easily understood to a much wider consumer market, concludes the study.
So, what can financial advisers and fund managers do to get millennials interested enough to invest in RI?
The report says managers should provide resources to inform and educate their clients on their beliefs and approach to responsible investment; provide ESG/sustainability integration examples and managers should disclose environmental, social and governance outcomes alongside financial performance against an industry agreed framework.
Daniel Lane, manager at Fidelity Personal Investing said in a recent blog post: “The extra leg-work ESG analyst teams conduct to clarify just how sustainable a business is, and how liable it would be to fines etc. if its operations went wrong, is designed to prevent shareholders being exposed to unnecessary risk.
“While each individual strategy will make judgement calls on which business sectors to include and exclude, many investors in the space seeking reliability of cashflow with a long-term view simply see a fund’s overall social aims as a happy bonus.”
Advisers are ‘catching on’
Research from Morningstar last year suggested that advisers are increasingly discussing ESG investing with their clients, whereas several years ago this wasn’t the case.
“Today, these advisers incorporate ESG strategies into their practice just as they would any other kind of investment strategy, and they’re asking most, or even all, clients about their interest in ESG investing.
“This shift, which advisers say has built momentum over the past three years, has coincided with a change in the ESG investment landscape. A decade ago, sustainable investing revolved around exclusionary strategies that avoided certain kinds of companies, so-called “sin stocks,” such as tobacco, alcohol, and gambling.
“ESG investing takes a more inclusive approach that looks for companies in every sector that have environmental, social, or corporate governance benefits. That shift, advisers say, has more resonance with a broader group of clients.”
Further reading on this topic: