Millennials and the Demand for Socially Responsible Investments
Investors concerned about doing the right thing are increasingly using their investments to express their views, especially millennials.
A recent survey from Morgan Stanley found that 86 percent of consumers born between the early 1980s and 2000 say they are interested in socially responsible investing (SRI). Millennials are also twice as likely to invest in stocks or funds where social responsibility is a part of the “value-creation thesis.”
“Sustainable investing now encompasses a wide range of factors, from environmental impact to gender and diversity,” said Lily Trager, Director of Investing with Impact at Morgan Stanley, in a press release. “These funds don’t simply avoid bad actors; by allocating assets to companies that perform high on ESG (environmental, social justice and governance) factors and, in some cases, use their leverage as shareholders, they can be catalysts for positive corporate change.”
Though naysayers have long argued that SRI investors are sacrificing investment returns for the greater good, that doesn’t necessarily have to be the case.
The iShares MSCI KLD 400 Social Index Fund, for instance, has gained 8.22 percent this year, outpacing the 7.8 percent return of S&P 500 Index. “Biblically-responsible investing” has paid off for Eventide Gilead, which has gained 11.6 percent this year while The Vanguard FTSE Social Index Fund has risen 9.68 percent. Calvert Investments, the largest SRI firm, however, has struggled. The company’s Calvert Large Cap Core Portfolio Fund has barely budged this year.
Demand for SRI investing, however, continues to surge.
According to the Forum for Sustainable and Responsible Investment, total U.S.-domiciled investments using SRI strategies, hit $8.72 trillion at the start of last year, an increase of 33 percent from 2014 and a 14-fold increase since 1995. That represents about one of every 6 dollars under management.
These assets are held by 477 institutional investors, 300 money managers and 1,043 community investing financial institutions. Money managers that have filed or co-filed shareholder resolutions on environmental, social and governance issues from 2014 to 2016 hold another $2.56 trillion in total assets. Among the issues of concern to socially conscious investors are climate change and human rights, according to the organization.