Impact Investing's Newest Champion -- the Millennial When you think about Millennials, those born between 1979 and 1990, what comes to mind? Perhaps someone in their late 20s still living at home with their parents? How about the recent graduate who just completed their third master's degree? What about someone who has figured out how to use their money to create both financial and social return? Am I getting warm yet? I'm guessing that the savvy young investor was not your first pick...
The reality is however that there are many in the financial markets and social sector who firmly believe that Millennials are critical stakeholders who will unleash impact investing's true potential within the next two decades.
[Spoiler alert: I do too.]
In fact, within the next 10 to 20 years, I'm betting that "impact investor" will be one of the most common phrases used to describe the next generation. Given that Millennials have come to define themselves as a generation driven by purpose and passion it seems like a fait accompli that they would also choose to direct their private capital, and that of the organizations with which they work, in order to generate measurable social good and financial returns. For champions of impact investing, the next generation represents an unprecedented opportunity to galvanize perceptions and to catalyze how investors look at long-term risks and returns.
Acknowledging that Millennials will play a significant role in the future of impact investing, we must also recognize that they won't, and can't, do it alone. With this immense potential and rapid growth of the impact investing ecosystem comes various considerations that have the potential to dramatically influence what happens 10, 15, 20 years from now -- including whether or not our big bet on Millennials and impact investing will become a reality.
Here are three critical insights for investors, financial advisors, government, impact businesses, corporations and foundations as they undertake efforts to support the Millennial generation's shift towards impact investing.
1. Millennials are the Next Generation of Social Good Stewards
At 86 million strong, the Millennial generation is the largest generation in modern history. They are on the receiving end of one of the largest wealth transfers between generations in recent times -- they'll share an estimated $30 to $41 trillion with Gen X from Baby Boomers over the next 40 years. With this transfer will come a new generation of stewards with preferences and ideas for how to direct their assets that will differ from that of the generations that preceded them. For example, Merrill Lynch recently released a survey that revealed 71 percent of Millennials prefer to self-direct their own investments, which is not surprising when this generation values peer recommendations and reviews above most other forms of information (as shared in the 2014 Millennial Impact Report).
For the impact investing movement to evolve, Millennials must be empowered to leverage their assets and integrate the deployment of them with their beliefs regarding blended value and social change.
2. They're Creating the New Norm
We're already starting to see the purpose-driven influence of this generation take hold. The 2014 Millennial Impact Report confirmed how a Millennials "desire to 'do good' is reflected in their employment -- from the companies they consider in an initial job search to the effect an employer's cause work has on overall job satisfaction." The bottom line... what an organization does, sell or produces is a primary consideration for this generation when deciding whether or not to apply for a job.
We won't have to wait long before what an organization invests in is linked to similar considerations for this generation of changemakers. Forward-thinking organizations are already taking notice and shifting their strategies to attract and retain not only the best next generation talent, but also to cater to next generation consumers and constituents.
Today, impact investments represent a mere 0.02 percent of the $210 trillion in financial markets around the world, when in reality it could easily be 10 to 20 times that size (US National Advisory Board on Impact Investing Report). The next generation is poised to achieve this as a confluence of factors has brought both Millennials and impact investing to this watershed moment.
3. But It's Not Going to Happen Overnight
Millennials have grown up in a relatively volatile era defined by events such as 9/11, the Iraq and Afghanistan wars, the Great Recession and Occupy Wall Street. Moving forward, the recent college graduate will have approximately $27,500 in student loans and will enter a job market where 40 percent of unemployed workers are Millennials. Not surprisingly given this perceived instability, most Millennials today are considered to be conservative and skeptical in relation to investing and saving -- even more so than their parents. When it comes to investing in the stock market, a recent report shows that 51 percent of high-net-worth Millennials "fear they will lose money by investing in traditional equity securities and 64 percent responded that they were "more comfortable investing in physical assets rather than stocks."
Yet, responses from Millennials, regardless of their net worth, show that there's something even greater at play, something that trumps the fear of losing money and investments with a higher risk profile or lower returns -- investments that create a positive social or environmental impact. In fact, in a 2013 survey of high-net worth Millennials 45 percent expressed their desire to use their wealth to help others and that they considered social responsibility a factor when investing (Spectrem Group study).
By rallying together to address these specific needs and concerns of the next generation of investors, we can harness their influence, dollars and convictions to not only meet their own investing needs and desires, but also finally move impact investing from niche to mainstream.
The reality is however that there are many in the financial markets and social sector who firmly believe that Millennials are critical stakeholders who will unleash impact investing's true potential within the next two decades.
[Spoiler alert: I do too.]
In fact, within the next 10 to 20 years, I'm betting that "impact investor" will be one of the most common phrases used to describe the next generation. Given that Millennials have come to define themselves as a generation driven by purpose and passion it seems like a fait accompli that they would also choose to direct their private capital, and that of the organizations with which they work, in order to generate measurable social good and financial returns. For champions of impact investing, the next generation represents an unprecedented opportunity to galvanize perceptions and to catalyze how investors look at long-term risks and returns.
Acknowledging that Millennials will play a significant role in the future of impact investing, we must also recognize that they won't, and can't, do it alone. With this immense potential and rapid growth of the impact investing ecosystem comes various considerations that have the potential to dramatically influence what happens 10, 15, 20 years from now -- including whether or not our big bet on Millennials and impact investing will become a reality.
Here are three critical insights for investors, financial advisors, government, impact businesses, corporations and foundations as they undertake efforts to support the Millennial generation's shift towards impact investing.
1. Millennials are the Next Generation of Social Good Stewards
At 86 million strong, the Millennial generation is the largest generation in modern history. They are on the receiving end of one of the largest wealth transfers between generations in recent times -- they'll share an estimated $30 to $41 trillion with Gen X from Baby Boomers over the next 40 years. With this transfer will come a new generation of stewards with preferences and ideas for how to direct their assets that will differ from that of the generations that preceded them. For example, Merrill Lynch recently released a survey that revealed 71 percent of Millennials prefer to self-direct their own investments, which is not surprising when this generation values peer recommendations and reviews above most other forms of information (as shared in the 2014 Millennial Impact Report).
For the impact investing movement to evolve, Millennials must be empowered to leverage their assets and integrate the deployment of them with their beliefs regarding blended value and social change.
2. They're Creating the New Norm
We're already starting to see the purpose-driven influence of this generation take hold. The 2014 Millennial Impact Report confirmed how a Millennials "desire to 'do good' is reflected in their employment -- from the companies they consider in an initial job search to the effect an employer's cause work has on overall job satisfaction." The bottom line... what an organization does, sell or produces is a primary consideration for this generation when deciding whether or not to apply for a job.
We won't have to wait long before what an organization invests in is linked to similar considerations for this generation of changemakers. Forward-thinking organizations are already taking notice and shifting their strategies to attract and retain not only the best next generation talent, but also to cater to next generation consumers and constituents.
Today, impact investments represent a mere 0.02 percent of the $210 trillion in financial markets around the world, when in reality it could easily be 10 to 20 times that size (US National Advisory Board on Impact Investing Report). The next generation is poised to achieve this as a confluence of factors has brought both Millennials and impact investing to this watershed moment.
3. But It's Not Going to Happen Overnight
Millennials have grown up in a relatively volatile era defined by events such as 9/11, the Iraq and Afghanistan wars, the Great Recession and Occupy Wall Street. Moving forward, the recent college graduate will have approximately $27,500 in student loans and will enter a job market where 40 percent of unemployed workers are Millennials. Not surprisingly given this perceived instability, most Millennials today are considered to be conservative and skeptical in relation to investing and saving -- even more so than their parents. When it comes to investing in the stock market, a recent report shows that 51 percent of high-net-worth Millennials "fear they will lose money by investing in traditional equity securities and 64 percent responded that they were "more comfortable investing in physical assets rather than stocks."
Yet, responses from Millennials, regardless of their net worth, show that there's something even greater at play, something that trumps the fear of losing money and investments with a higher risk profile or lower returns -- investments that create a positive social or environmental impact. In fact, in a 2013 survey of high-net worth Millennials 45 percent expressed their desire to use their wealth to help others and that they considered social responsibility a factor when investing (Spectrem Group study).
By rallying together to address these specific needs and concerns of the next generation of investors, we can harness their influence, dollars and convictions to not only meet their own investing needs and desires, but also finally move impact investing from niche to mainstream.
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