Top 3 Reasons Why Millennials Are Obsessed With SRI

In the eyes of many younger investors, it’s not all about financial returns anymore. Millennials are the largest (and loudest) proponents of sustainable investing and Socially Responsible Investment {SRI}. Why is that? There’s no short answer, but before delving into the topic it’s worth defining what SRI actually means.

What is SRI?

SRI is the practice of affirmatively investing in firms and funds that operate in a socially and environmentally conscious way. One thing to keep in mind is that what’s considered ‘socially responsible’ is fluid in nature and will often track the political and social climate of the time. Currently, SRI heavily revolves around topics like sustainability, public health, and racial justice.  As you might expect, the first aforementioned focus area has been driven by awareness of climate change. The latter two topics came to the millennial-forefront through the COVID-19 pandemic and social movements that have surged within the past few years. 

Why Do Millennials Care?

Investing in socially responsible companies has become a hallmark of Millennial (and even younger) investors. Describing it as a hallmark of millennials isn’t an overstatement – a 2021 report compiled on behalf of the Morgan Stanley Institute for Sustainable Investing shows that 99% of millennials in the study expressed interest in sustainable investing. That’s up 4% from the previous study conducted in 2019. Moreover, this generation cares more about these issues than the general population, which expressed 79% interest in SRI .

The same report attributes the obsessive focus on SRI to four broad factors: climate change awareness, public health and support for small businesses amidst the COVID-19 pandemic, and social justice issues. Millennials are about twice as likely as the average investor to invest in companies targeting these types of social and environmental goals. Of the three factors, the most significant to Millenials is climate change, with around 88% of surveyed Millennials interested in investments that tackle it.

Concerns about public health and the survival of small businesses skyrocketed as a result of the pandemic and millennials were about 8% points higher on the scale in terms of caring about impactful investments. The Morgan Stanley Institute for Sustainable Investing also states that 75% of millennial investors have made or plan to make investment changes within 12 months in tandem with racial justice movements. In an interview with Penta, Morgan Stanley’s head of global sustainable finance, Matt Slovik, said that this includes supporting firms with a proven track record of diversity and inclusion.

 Is SRI the future?

Over the next few decades, millennials and Gen X’ers will receive the largest intergenerational wealth transfer in history: $30 trillion. Chances are that you’re one of the lucky beneficiaries. Pair that with the steadily increasing focus on social and environmental issues, and you might figure that SRI is the way forward. 

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