Will Oulton, Global Head, Responsible Investment, First State Investments
A lack of education is the primary barrier preventing greater engagement in responsible investment (RI) amongst millennials, according to a survey by First State Investments and Kepler Cheuvreux.
The survey of more than 400 millennials, conducted to ascertain millennial attitudes towards RI, found that while more than four in five (81%) would be interested in investing in socially responsible or sustainable investment products, a similar proportion (82%) believe more education is needed to drive interest in socially responsible investing (SRI).
Almost half (49%) of those millennials surveyed currently hold investments in funds, but despite the apparent interest in RI, less than one in 10 (9%) currently invest in a fund focused on sustainability issues.
Much has been written about millennials and their consumer practices and behaviours, but little work has been done into how such behaviours may translate in terms of their choices as consumers of financial products and services. It is clear from the survey that education is critical to convert interest into action, placing the onus on the financial industry to decipher the meaning of and improve accessibility to responsible investment products, for this group.
The survey also highlighted the need for the financial industry to embrace digital platforms. More than half of millennial respondents (57%) said that digitisation, including digital investment platforms and live chat functions would encourage them to invest in RI products.
ESG as a means to boost returns
The survey revealed that millennials are driven by a desire for their investments to have a positive impact, and also to boost returns. More than a quarter (28%) highlighted impact investment – the ability to have a positive social or environmental impact, alongside financial return – as one of the themes of most interest to them, while 57% think the application of ESG can boost long-term returns.
Approximately half of those surveyed also said that perceived lower financial returns (50%) and the perception of higher fees (46%) would stop them investing in RI products.
Environmental considerations dominate within this group, with more than a third (37%) citing it as the theme they are most sympathetic to.
Respondents were also asked about their current and future saving habits, revealing ambitious targets over the next ten years. The majority (60%) currently earn less than £35,000 per year, with the same percentage (60%) saving less than £500 per month. However, more than half (55%) said they hoped to be saving in excess of £1,500 per month over the next ten years.
When taken alongside the interest in RI, there is the potential for a huge inflow into ESG-focused products over the next 10 years as millennials reach their savings targets. Our industry needs to act now to ensure this group has the access and information needed, but also to dispel some of the underlying perceptions about the negative impact RI can have on returns. There are implications for providers across the entire investment ecosystem, including scheme trustees, managers, advisers and platforms. Transparency, access to information, and better reporting will be key factors in ensuring the interest in RI from this group is translated into action as their disposable
The survey also revealed shifting generational attitudes. More than four in five (81%) said they thought friends and colleagues of their own age are more easily convinced of the importance of responsible investments than previous generations.
Demand for expertise was another key theme. For more than three quarters (78%) of millennial respondents, expertise in socially responsible/sustainable investing would be a reason to choose an asset manager or financial services provider.
Millennials also had a low tolerance for corporate controversy. 82% said they would tolerate only five or less controversial company incidents before changing their investments, highlighting the importance of good governance practices.
Will Oulton is the Global Head, Responsible Investment at First State Investments (FSI) based in the UK and is responsible for defining and delivering FSI’s responsible investment and stewardship strategy globally. In this role he is tasked with advancing FSI’s understanding of how ESG Factors impact long term investment value. He is also responsible for developing FSI’s thought leadership programs and managing the RI Governance structure for the business.
Previous to this he was the Head of Responsible Investment for Mercer Investments across Europe, the Middle East and Africa, advising institutional asset owners on environmental, social and corporate governance matters. He has more than 15 years of experience working in sustainable and responsible investment. Before joining Mercer, Will was the Director of Responsible Investment at FTSE Group, where he led the development of FTSE’s global sustainability services.
In December 2015 he was appointed president of the European Sustainable Investment Forum (Eurosif). He is also a Trustee Director of the CBA (UK) Pension Scheme, a fellow of the Royal Society of Arts, an Honorary Associate Professor at Nottingham University Business School’s International Centre for Corporate Social Responsibility, Expert Panel Member of the Prince’s Accounting for Sustainability program and sits on a number of investment industry advisory boards and committees.