22 March 2017
Reporter: Stephanie Palmer

ESG key for millennial investors

Millennial investors find environmental, social and governance factors to be important, but their return expectations are unrealistic, according to a speaker at the ALFI European Asset Management Conference.

Citing the 2016 Schroders Global Investors Survey, Courtney Waterman of Schroders noted that, on average, investors aged 35 and under expect returns of 10.2 percent per annum, compared to a global stock market yield of just 3.75 percent, at the time of the survey.

Despite this grand expectation, this demographic was less willing to take on any capital risk.

There is a general trend towards “short-termism”, Waterman said, with investors planning on holding investment for an average of 3.2 years. Of all survey respondents, 18 percent said they will hold their investment for more than five years.

Among millennials, however, 41 percent said they will invest for under a year, while only 8 percent said they will invest for over five years.

When asked what is important to them regarding their investments, the same millennial investors generally rated ESG issues as highly as they rated “some of the more financial factors”.

Waterman suggested that getting returns in line with inflation was considered equally important to “investing in a company that is looking at the impact it has on the environment around it”.

Equally, millennial investors were more inclined to stick with an ESG investment for longer, even if it was not performing as expected. Some 91 percent agreed they would continue with an ESG investment.

The importance placed on ESG issues could bode well for the industry, Waterman said. Aside from the social initiatives that come with this kind of investment, ESG could be the key to keeping the next generation of investors engaged.

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