Julian and Marian recently attended a conference with other financial professionals in Glasgow on the issue of sustainable investment.
At the conference one of the speakers mentioned how it was important for financial professionals to be aware of sustainable investing as it is something which is valued by “younger investors”.
Given this has been a cornerstone of the Ethical Futures’ proposition since the business was founded and a matter which is of importance to clients of Ethical Futures for many years, Julian naturally felt the need to speak up. We believe that this is not just something which is important to Millennial or Gen Z investors but is something which people of all ages are interested in and we believe there is ample evidence to prove it.
The idea that investing sustainably is important to people of all ages is not new. Back in 2001 Australian academics Tippet and Leung found that ethical investing (their definition of ethical investing included not doing harm to the environment) was already important to many people. It was most common amongst those in the 35-44 age group at that point. More than 60% of the investors in this age group who responded to their survey considered themselves ethical investors. Even in the age group which was least interested, those aged over 55, 16% used an ethical investment service.
Yet the issue is not clear cut. In 2016, Diouf, Hebb and Touré looked at investors in Canada found those who were younger (less than 35 years old) were more likely to have chosen to invest in a way which is socially responsible, though their data still showed that at least 10% of investors over 35 were more inclined towards socially responsible investments. Other studies from Rosen (1991) and Hayes (2001) suggest that younger investors are more interested in socially responsible, ethical or sustainable investments in respect of their investments. Indeed, Hayes found that environmental factors were more important than financial return to investors younger than 25.
We don’t believe that people lose their interest in ethical or sustainable matters as they get older and the evidence suggests that this can’t just be about Millennial or Gen Z investors being more interested in this than investors of previous generations because these generations weren’t investing at the time these studies were carried out, some weren’t even born yet! Some of our investors are part of the vanguard of this sector as 61% of them are Baby Boomers or older!
Our external Compliance Associate Alan undertook some research for the Global Ethical Finance Initiative (GEFI) in 2021/22. Alan’s research looked at investors in Scotland specifically, reporting the results of two surveys taken in 2019 and 2021. These showed that ethical, environmental and social issues were of importance to more than half of investors in most age groups. The age group which saw this as least important were those aged 45-54 and, even then, more than 40% thought these were important factors they wanted taken into account in their investments.
If anything, the data suggests that sustainable, ethical or responsible investing isn’t just something which is more important to Millennial investors, but something which is important to investors of all age groups, even if younger people tend to be more willing to explore this type of investing at any given time.
It may well be that in each generation those who engage in investing earlier are dominated by those who are more interested in investing sustainably and that as that group ages they are joined by others who are less inclined toward sustainable investment, bringing the proportion of sustainable investors down. Yet, the evidence from GEFI’s surveys shows that ethical, environmental and sustainable issues are considered more important to those investors in Scotland aged over 55 than those aged 45-54, suggesting that this is not necessarily the case.
Part of the problem may be that investors are unwilling to sacrifice financial returns to achieve environmental or social objectives, something which younger investors were much more prepared to do. As people age they may feel that their own financial concerns are more important than investing in a way which is ethical or sustainable. It is important to remember however that investing in line with your ethical preferences, whether sustainability related or otherwise, does not necessarily mean sacrificing returns.
Your investments should be designed to achieve the specific outcomes you are looking for, financial or ethical. At times of financial difficulty, austerity or hardship we do not need to put our values to one side.
If you want to read the report on the GEFI survey, you can find this here.
(Various academic articles have been referenced in the course of this article. Should you wish to read these a full reference list can be provided, contact Marian at marian@ethicalfutures.co.uk .)
It is important to take professional advice before making any decision relating to your personal finances. Information within this article does not provide individual tailored investment advice and is for guidance only. We cannot assume legal liability for any errors or omissions it might contain. Ethical Futures llp is authorised and regulated by the Financial Conduct Authority.