Almost 73 per cent of Millennials and Generation Z demand environmental, social, and governance (ESG) in their investment portfolios, according to DeVere Group.
The new global study polled more than 800 clients around the world with 72.8 per cent saying ESG was a preference in portfolio allocation.
According to the deVere Group, the younger generation is drawn to investments that reflect their beliefs, with a strong preference for ESG, despite talks that impact investing prioritises social and environmental aims over profitability goals.
Critics, particularly in the US, are concerned that ESG indicators are subjective and inconsistent, casting doubt on their genuine influence. Furthermore, there are fears that ESG investing may result in overregulation and reduced corporate profitability, harming investors.
But DeVere Group’s study suggests that these criticisms are not deterring younger investors
According to other studies, ESG-focused organisations are often better positioned to manage risks and capitalise on opportunities related to environmental and social changes, with sustainable practices reducing costs, increasing resource efficiency, and improving regulatory compliance, all of which benefit the firm reputation.
DeVere Group CEO Nigel Green says: “This survey is a massive wake-up call. Over the next few decades, an estimated $68 trillion will be transferred from Baby Boomers and Generation X to Millennials and Gen Z.
“The study shows financial advisors need to adapt their strategies to meet the evolving preferences of younger clients, incorporating ESG criteria into their offerings; investment firms must develop and promote ESG-compliant investment products to attract and retain the growing base of younger investors; regulators need to recognise the importance of ESG investments and ensure that regulations support and encourage sustainable investing practices; and companies need to up their ESG credentials if they want to grow in the long-term.”
“The high demand for ESG-oriented portfolios among Millennials and Gen Z indicates a growing recognition that financial performance and ethical considerations are not mutually exclusive,” says Nigel Green.
“As younger generations seem to appreciate, the argument against ESG investing overlooks a growing body of evidence that suggests companies with strong ESG practices tend to perform better over the long term.
“Our experience had taught us that younger generations would be interested in impact investing – but even we were surprised by the extent of their conviction that this study reveals.”