AA Pension Scheme

Millennials are driving interest in sustainable investment

Sustainable, socially responsible or ESG (environmental, social and governance) investing is on the rise, in companies or funds which aim to achieve market-rate financial returns, while pursuing positive social and/or environmental impact.

According to a number of studies, millennials (born between 1981 and 1996) are universally more engaged in corporate social responsibility efforts and are driving up demand for sustainability, looking at how they spend, where they work and how they invest.

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

However, in an analysis of 16 of the largest pension schemes, just two schemes were directly engaging with large global companies on their role in the climate crisis. And were the only schemes to go into depth on climate change, acknowledging the need for robust engagement with companies in their portfolio to reduce their carbon emissions.

The vast majority are falling short on climate change duties, despite new regulations introduced in October last year, which require schemes to publish policies on how they specifically incorporate climate change and other environmental, social and governance (ESG) issues.

On a more positive note, the analysis did also find an increase in the amount of ESG and climate focussed funds incorporated into master trusts’ default asset allocation.

ESG issues are now the top priority for millennials. They understand that it’s perfectly possible, and increasingly necessary to make a profit, while positively and proactively protecting people and their planet.

They are driving up demand for corporate social responsibility and sustainability more than ever, and with sustainable investing drawing more support, millennial investors will continue to lead the way.

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