Impact investing involves investing in companies that use their products to help social and environmental causes. From promoting gender equality to finding new ways to fight climate change, more companies are impacting our world on a daily basis. While millennials may have opened the door to impact investing, they’re now being joined by both younger and older investors.
Why Focus on Millennials?
The main question facing many publicly traded companies is why they should focus on millennials, considering the fact that they tend to be deeply in debt and have relatively low levels of disposable income. While that may be true, the money millennials do have to either spend or invest often supports companies that offer ESG incentives. ESG stands for environmental, social, and governance factors, so it’s not just about the products that these companies create. It’s also about how responsible these corporations are in the ways that they operate. For instance, millennials tend to seek out companies that offer more advancement opportunities to women and people of color.
Secondly, older generations watch how millennials act and often follow suit. For example, millenials have been early adopters in investing in green technology, and baby boomers haven taken notice. As older investors and consumers mimic millennials, they will also take the time to learn about the good that impact investing has on society.
How Are Finance Companies Responding?
Investment firms have noticed these trends and some have started to adjust the services they offer accordingly. One rising trend is the development of systems for showing investors how their money is being deployed. This higher level of transparency provides the kind of feedback that helps investors determine that their money is being used to help the causes that they care about. In this way, investors can grow their wealth as they act to benefit society.
Taking the interest in impact investing a step further, retirement savings funds are adding ESG companies to their investment offerings. In the past, it was up to the individual investor to research each company and determine how that company was operating and pursuing ESG concerns. Today, more pension plans offer funds that specifically follow ESG concerns. This makes it easier for investors to choose companies that offer something of value to society or to the environment.