Millennials rate responsible investing more highly than anticipated returns

Does your company ensure that workers are protected, minimises its impact on the environment, or has a diverse board?

If you replied yes to any or all of those questions, congratulations, you are probably on the radar for millennials looking to invest.

A new global survey by independent financial services advisory deVere Group found that some 77 per cent of millennials — people who were born between the early 1980s and early 2000s — cite Environmental, Social and Governance (ESG) investing as their top priority when considering investment opportunities.

So just what is ESG? Environmental covers issues such as climate change policies, carbon footprint and use of renewables while the social aspect includes workers’ rights and protections. Governance covers areas such as executive compensations, diversity of the board and corporate transparency.

You can read our handy little guide for more info.

“This survey underscores that whilst traditional factors – such as anticipated returns (10 per cent), past performance (7 per cent), risk tolerance (4 per cent) and tactical allocation (2 per cent) – are important factors in millennial respondents’ investment decision-making, they are no longer enough,” deVere chief executive officer Nigel Green said.

“Indeed, Environmental Social and Governance considerations now sit at the heart of that process.”

Green noted that companies that scored well in terms of ESG credentials often outperformed the market and had lower volatility over the long-run.

“For this reason and, importantly, because the biggest-ever generational transfer of wealth — likely to be around $30 trillion — from baby boomers to millennials will take place in the next couple of years, ESG investing is set to grow exponentially in the 2020s,” Green said.

READ: Millennials are set to come into a LOT of money… but which stocks will benefit from their newfound wealth?

“As responsible investing becomes increasingly mainstream, and millennials become the major beneficiaries of the transfer of wealth, we can also expect institutional investors, such as pension funds, amongst others, to pile into ESG over the next few years.”

Responsible Operations

Global mining heavyweight Rio Tinto (ASX:RIO) recently started offering “Aluminium Stewardship Initiative” certified, responsibly produced aluminium from its smelters in Australia and New Zealand.

This covers low carbon emissions and high standards for human rights across its Amrun and Weipa bauxite mines, Yarwun alumina refinery, and the Bell Bay and NZAS aluminium smelters.

Lithium miner Pilbara Minerals (ASX:PLS) started public reporting of its sustainability performance in 2019, while fellow lithium producer Orocobre (ASX:ORE) says it is committed to supporting local communities, the environment and responsible management of natural resources in the country it operates in.

Meanwhile, Alexium International (ASX:AJX) has been lauded for having more women on its board than men.

READ: Less than 30 small caps have equal representation of women on their boards. There are 1714 small caps