The coronavirus pandemic has shaken financial markets and has led investors to take a closer look at their investments.
These changes have created opportunities to enhance long-term portfolio objectives and in this new environment investors are looking to invest in strategies they find meaningful and motivating.
The coronavirus pandemic has shaken financial markets and has led investors to take a closer look at their investments. These changes have created opportunities to enhance long-term portfolio objectives and in this new environment investors are looking to invest in strategies they find meaningful and motivating.
The narrative around environmental, social and governance (ESG) investing has traditionally focused on the younger generation’s potential to influence its transition from a niche to a mainstream strategy.
Research from the Share Centre finds almost half of Gen Zs (49%) and 47% of millennials would be happy to make slightly less profit if the company they invest in is more aligned with their values.
However, recent trading activity from customers of the Share Centre shows investors from all generations are becoming increasingly aware of the trend; it’s becoming more evident that older generations want to educate themselves on how to make ESG investment decisions and how best to align their investment objectives with their values.
While responsible investing continues to be popular among millennials and Gen Zs, recent analysis of trading activity over the period of the coronavirus pandemic shows there has been an increase of 107% in the number of trades in ESG funds by Baby Boomer investors. Likewise, investors over 75 have increased their exposure to ESG funds, with trades up 14% from the same period last year.
A common objective shared by baby boomers, Gen Xers, and millennials is that aligning investments with their values does not come at the cost of portfolio performance, a belief which has historically been held by many. However recent data has shown these concerns to be misplaced, with sustainable funds containing strong ESG principles outperforming conventional funds in the first quarter of 2020 according to research.
Lucinda Gregory, investment research & guidance manager at the Share Centre comments: “It’s becoming increasingly clear all generations want to reimagine the future of investing especially now there is an opportunity to create change in the aftermath of the pandemic. Record inflows into ESG funds certainly reflect this mind set.
“It would appear investor’s concerns of sacrificing performance for principles are misplaced as data from Morningstar shows sustainable funds incorporating strong ESG principles outperformed conventional funds in the first quarter of 2020. Many believed the coronavirus pandemic would halt the unprecedented momentum of responsible investing witnessed in 2019, the recent strong performance of funds incorporating ESG factors has proved the cynics wrong.
“As more generations understand it does not have to be a choice between performance and principles, ESG investing could reshape the investment landscape assisted by the biggest-ever generational transfer of wealth – from baby boomers to millennials. The recent pandemic will hopefully only fasten the pace of this revolution and enable us to ‘build, back, better’ creating both a more sustainable world and corporations alike.”