It's becoming a known fact that millennial consumers rally behind socially responsible companies, with 70 percent reporting that charitable causes are a key driver to their business transactions. This generation holds $2.45 trillion in spending power and millennials could be shaping the future of how we invest.
Socially responsible investing (SRI) is nothing new. In fact, It dates as far back as the Quakers in the 1700s, who refused to participate in the slave trade for moral reasons. In a modern context, there was a focus on avoiding tobacco companies in the 1990s, and in today's investment landscape, SRI is most closely associated with organizations that are socially or environmentally conscious.
Not only have they brought corporate responsibility to new heights, but they're just as concerned about how their own company's funds are invested.
This is particularly true when it comes to company sponsored 401(k) accounts. They want to know that the contributions to their retirement accounts are being invested in vehicles that align with their values and need for financial growth.
How does this affect organizations that aren't millennial owned? With the ever-increasing percentage of millennials in the workforce, it's projected that by 2020 they will occupy over 46 percent. "If companies have rested on doing business around the old baby boomer model, they're going to have to adjust," says Amir Eyal, CEO of Mylestone Plans. "It's clear this generation holds some influential keys to the future, and social responsibility is a top priority."
But being that navigating the entrepreneurial world, coming into money (maybe for the first time) and knowing where to put it is not straightforward. We want to invest in a worthy cause that gives us a high return, but knowing where it really goes is crucial. It would probably be pretty infuriating to invest in a certain company, only to find out that the organization's mutual funds are distributed to a cause we're entirely against.
Mr. Eyal, who manages investment portfolios for numerous organizations, was kind enough to give us his 3 tips for ensuring our investments align with our personal values. Here's what he said:
1. Empower yourself by learning the basics. Educating yourself about the terminologies, concepts, and risks related to investing your money. This initial and most crucial element is not only extremely empowering, but will also help you be part of the decision making process rather than leaving up to others.
2. Find an advisor whose company appears to have similar values as yours. Ask questions about what they do to support their community and how they're playing a part to contribute to the greater good.
3. Conduct your own research on the numerous SRI products that are available. The Forum for Sustainable and Responsible Investment and www.Socialfunds.com are two great resources to start your journey.
While the media as a whole might portray millennials as buried in their smartphones with little concern for the world around them, their investment habits tell a much different story. A survey by Standard Life Investments showed that only 35 percent of 25-34-year-olds were concerned more about returns than social and environmental issues. Compare that to nearly half of 35-44-year-olds.
As socially responsible investing goes from being a respectable way of doing the right thing and feeling better about oneself to a future where socially conscious business is truly the norm. With a little help from millennials who have already shown a preference to this kind of thinking, that kind of lasting change could become a reality.