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Millennials leading the charge – but can all investors benefit by adopting their socially conscious investment style?
Does the flow of money into ESG funds indicate a radical change in how we will measure the return on investing in the future? The rise in impact investment funds that tap into the millennial pro-climate and anti-conflict beliefs in recent years certainly adds weight to this school of thought. For the fund industry, any product that can swim against an outgoing tide is attractive. But the accelerating flows into SRI/ESG Funds may have a greater significance. For years the asset management world has been looking for a way to engage the post-Baby Boom generations commonly referred to as ‘Gen X’ and the ‘Millennials’. As the Baby Boomers retire in growing numbers, taking their accumulated assets with them, that search has taken on a greater urgency. With Millennials expressing pro-environment, anti-conflict and social justice priorities in survey after survey, the recent take-off in SRI/ESG Fund flows suggests that the asset management world has finally found a vehicle that appeals to this elusive cohort.
While critics may dismiss the millennial approach to investing for being ‘emotional’, they are in fact spending more time researching their investment options than previous generations thanks to the mass of information digitally available to them. The combination of a new considered and considerate approach to investing is certainly generating some striking numbers for funds with socially responsible or environmental, social and governance mandates. While Equity, Bond and Balanced Funds saw 0.1%, 1.2% and 3.3% of the assets they managed at the start of 2018 redeemed during the year, the funds with those groups with SRI or ESG mandates attracted flows that ranged from 5.2% of AUM for Developed Markets Equity Funds to an eye-popping 73% for Emerging Markets Bond Funds.
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