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Millennials drive impact investing trends

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A recent survey by American Century Investments has found that the appeal of impact investing in both the US and the UK continues to increase, particularly among millennials.

“These trends are a significant signal to asset management firms that they will need to enhance their investment standards in an industry that will soon have to meet the expectations of more socially and environmentally responsible millennials,” says Guillaume Mascotto (pictured), vice president, head of ESG and investment stewardship at the global asset manager.

 
The survey, which included around 2,000 respondents from the US and UK, found that just under 60 per cent of both US and UK respondents say that impact investing is either ‘somewhat’ or ‘very appealing’. For US respondents, this is up from 49 per cent in 2018 and 38 per cent in 2016.
 
Millennials (ages 21 to 38) displayed heightened interest in impact investing in both the US and UK, at 65 per cent and 72 per cent, respectively.
 
“Millennials are one of the main reasons for this rising interest in ESG. This generation has a greater global outlook than the previous generation and many believe climate change and healthcare are universal issues which could have repercussions on their own future,” says Mascotto.
 
He believes that they are demonstrating a desire to align their views with investment activities and that, as a result, ESG and impact investing will be an increasingly important factor as wealth is transferred from baby boomers to millennials.
 
They not only want a secure financial future, but they also want to make a positive impact, explains Mascotto. “It is not only about managing the money; a manager should have a great impact product but should also walk the talk and generate impact on a corporate level.”
 
The survey also highlights the difference between the UK and US mindset from a corporate perspective: 64 per cent of UK respondents consider ‘impact on society’ important compared to 57 per cent of US respondents.
 
“In Europe, there is a focus on company valuation that goes beyond just quantitative analysis, such as a company’s record on human rights or what it stands for. For example, UK investors have historically cared about the triple bottom line; an equal balance between the environment, social and governance factors,” says Mascotto.
 
He explains that students are exposed to global issues from a younger age in the UK. “Universities in the UK are strong in humanities, whereas in the US, until quite recently, there has been more of a focus on standardised testing and quantitative analysis.
 
“Having said that, in the US, impact investing is catching up very quickly. In 2016, only 42 per cent of US respondents believe impact on society is either very or somewhat important, compared to 57 per cent in 2019.”
 
 “Looking ahead, Mascotto believes that it will be those asset managers with an investment-led and solutions-driven ESG program across asset classes that will succeed in catering to the evolving needs of clients.”
 
 
 “Too often we see ESG analysts in compliance and risk roles. However, in our opinion they should sit in the investment department and focus on financial materiality – what moves the needle and how can ESG help in fundamental analysis.”
“Impact investing, and sustainable investing more broadly, is a global phenomenon and is very important for both asset owners and managers. This is not a fad,” concludes Mascotto.
 

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