Although older generations account for the bulk of investable assets, the younger generation is more interested in responsible investment
- Our research revealed that an average of 70% of end investors are interested in ESG, but the level of interest is strongly linked to age, with those aged between 21 to 34 being the most likely to embrace sustainable investing
- By 2030, millennials are expected to control over $20 trillion of assets globally
- Three out of ten end investors aged between 55-64 believe their investment decisions will not have an impact on climate change, while 35% is not convinced integrating ESG criteria can improve investment results
Younger people are more interested in responsible investing, but the bulk of investable wealth lies with the older generations, begging the question: should asset managers market ESG strategies to somewhat unconvinced older generations or build a strong ESG reputation among millennials who will be the principal investors of the future?
Fuelled by increased societal awareness of climate change, new regulations and investor demand, the integration of ESG criteria into the investment process is becoming increasingly common. Sustainable investment assets grew by 34% from 2016 to 2018, reaching more than $30 trillion globally at the start of 2018, according to research by the Global Sustainable Investment Alliance. Predicting the future growth of ESG assets is complicated, but BlackRock has estimated that assets in ESG ETFs alone will increase from $25 billion in 2018 to $400 billion by 2028.
While interest in ESG is growing across the board, the level of interest is strongly linked to age, with investors between 21 to 34 being the most likely to embrace sustainable investing. Our recent study* among end investors revealed that an average of 70% of respondents in the UK, Italy, Germany and the US are interested in responsible investing. The level of interest decreases as age increases, yet even among investors aged 55 to 74 more than half is interested in ESG.
Although young investors are the most fervent ESG supporters, asset managers might wonder why they should focus their marketing efforts on a younger segment that usually holds less investable assets compared to older investors. However, the millennials of today will be the older (and wealthier) investor groups of tomorrow.
Between 2015 and 2050, $30 trillion in financial and non-financial assets will be passed down from the older generations to their heirs (born after 1965) in the US alone, according to estimates by Accenture. Besides assets changing hands, millennials are also creating their own wealth – by 2030, they are expected to control over $20 trillion of assets globally.
Furthermore, older investors indicate a lower level of interest in ESG, but that does not mean that they have a negative attitude towards responsible investing. If asset managers can demonstrate the benefits of ESG, including potentially lower risk and higher returns, there seems little reason for older investors to shun ESG investments.
Indeed, our research gives some indications about the concerns older investors have around ESG investments. Three out of ten respondents aged between 55-64 believe their investment decisions will not have an impact on climate change, while 25% is not convinced integrating ESG criteria can improve investment results.
There is an opportunity here for asset managers: by tilting their ESG marketing towards explaining the benefits, it could convince the older generation to buy into ESG strategies as well as building their ESG brand for the longer term.
* Fundamental Research conducted 5,400 interviews with end investors in October-November 2017 in the US and in April 2018 in the UK, Italy and Germany. To qualify, respondents needed to invest either in mutual funds, bonds, stocks and/or ETFs and have a gross personal income above the national average.