Baby Boomers and Millennials on Impact Investing
Baby Boomers and Millennials on Impact Investing Staff

The spending habits of both millennials and boomers have been researched for quite some time. Those born roughly between 1946 and 1964 exhibit contrasting investment strategies compared to their millennial counterparts. Boomers might be more interested in purchasing NYSE F stock, but a growing investment market gaining considerable attention for millennials is the realm of socially responsible investing or SRI. Other known monikers are referred to as corporate social responsibility (CSR), environmental social governance (ESG), or impact investing. These are not new concepts, yet millennials are redefining the sector.

Who Does SRI Investing Attract?

Baby boomers account for 40% and 53% of mutual fund ownership and assets, respectively. Boomers are at the forefront of mutual fund ownership. SRI investing is growing in popularity among the newer generation. SRI investments are made with the idea of making a social impact with one's funds. Social issues and governance is the main focus of such investments.

Around 43% of millennials are likely to make impact investments. On the other hand, only about one-third of the Gen X population consider ESG investments, along with only 25% of boomers following suit. Americans from ages 20-30 are twice as likely to invest in companies based on their social or environmental impact. Millennial investors are showing a primary concern for the social responsibility of companies rather than return on investments.

One explanation for the reluctance of boomers to invest in SRIs stems from the fact that many of the investments in their portfolios were made before impact investing was an option. In addition, as boomers draw near retirement they are less likely to participate in differential or experimental investment strategies.

Types of Investments Reflective of an SRI Portfolio

Examples of the sort of investments that would be indicative of an impact investment focused stock portfolio include:

  • Low carbon - companies who restrict the use of fossil fuels
  • Gender diversity - companies with more female board members and management
  • Clean tech - companies that make environmentally sustainable forms of energy
  • Socially responsible - the possibility of the elimination of companies involved with military weapons, alcohol, or tobacco

Impact Investments Comparative to Market Standards

Impact investments have been closely studied by independent researchers such as the MSCI Leaders Index. SRIs have outperformed industry benchmarks for ten years running. During the period of study, it was found that impact investments were better protected from disadvantages in the market. In May of 2018, the Global Impact Investing Network reported close to 140 billion dollars invested in SRI strategies. These figures were a big jump from the $10.6 billion valuations in 2014.

Industry Waves Being Created

Close to half of the millennial population, or forty-seven percent, are so motivated by impact investing that they claimed they'd move their brokerage account in order to gain access to SRIs. These waves in investment portfolios are prompting publicly traded companies to be more critical of their own social and environmental impact. For those who wish to use their money to support the best companies, the definition of such is not as clear-cut. Companies that incorporate positive social and environmental practices into their core business model are at the forefront of SRIs. The impact investors have on the matter is their unwillingness to invest in companies involved in controversies that are connected to pollution or the manufacturing of firearms for example.

Who Does SRI Concern?

Between the primary focus of mutual funds or SRI investments, both markets serve profitable outcomes. The adversity of boomers' when it comes to portfolio makeup makes them less likely to make experimental investments in newer markets. The burgeoning market of socially responsible investments is a profitable sector. Proven to be a source of valuable portfolio insight, even publicly traded companies are gaining traction in terms of modifying business practices.

The difference between millennials and boomers being the notion that millennials are more concerned with the social or environmental impact of their investments primarily. The return on investment is the main concern of boomers when building their personal portfolios. The difference between the two generations is the social responsibility attached to one form of investment. On the other hand, both forms of investments provide great returns. The strategies of boomers comparative to millennials are indicative of generational standards in a changing marketplace.

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