While millennials seem to be the generation most interested in applying their ideals on environmental, social and governance (ESG) issues to their finances, Gen Xers and baby boomers are also expressing growing interest, according to new research from Allianz Life Insurance Company of North America.
The firm’s new study, ESG Investor Sentiment Study,found that although millennials are more likely to make investment and purchasing decisions based on issues that are important to them, Gen Xers and boomers are also putting their values into action.
Nearly two-thirds (64 percent) of millennials said ESG issues are important in their investing decisions with Gen Xers not far behind at 54 percent and boomers at 42 percent. In addition, majorities across all generations say ESG is a key factor in which companies they choose to do business with (77 percent of millennials/64 percent of Gen Xers/61 percent of boomers).
“Millennials get a lot of attention for driving ESG investing,” said Todd Hedtke, chief investment officer for Allianz Investment Management, in a news release. “But when it comes to investing in and doing business with good corporate citizens, there is interest across the board and it’s only going to grow.”
Currently only 17 percent of millennials are participating in ESG investing (compared with Gen Xers at 7 percent and boomers at 3 percent), yet nearly half of Gen Xers and boomers say they are interested in having some money in ESG investments at 49 percent and 47 percent, respectively.
In fact, baby boomers are more likely than millennials and Gen Xers to say that the reason they want to participate in ESG investing is to encourage companies to be good corporate citizens (61 percent of boomers, compared with 51 percent of millennials and 48 percent of Gen Xers).
Areas of focus for all generations
Asked about the single most important issue when it comes todoing business with a company, all generations agree social issues such as diversity in the workforce and consumer protection are most important, followed by corporate governance issues and environmental topics.
When it comes to making investment and business decisions, millennials are more likely to take action based on issues that are important to them. But there are a few key issues that make baby boomers more likely than other generations to take their business elsewhere, including transparency in business practices and finances, levels of executive compensations, and charitable contributions made by a company.
The study also found that millennials are more likely to be interested in learning about various types of ESG information. But all generations are in agreement that they aren’t sure how to evaluate if the companies included in an ESG investment care about causes they support (71 percent of millennials/64 percent of Gen Xers/69 percent of boomers).
“These stats show us that people from all generations are looking to learn more about ESG and want to put their values into action,” said Kelly LaVigne, vice president of Consumer Insights at Allianz Life, in the release. “But they feel they need more education and guidance on how to best make ESG investment decisions.”
Opportunities for financial professionals
In addition to the generational differences, the study also found that most financial professionals have yet to take a proactive approach helping clients learn about and participate in ESG investing.
Only 30 percent of Americans working with a financial professional say they have discussed ESG investing with their advisor, and most of the time it was the client who initiated the conversation (69 percent). This, despite the fact that three-quarters of respondents currently working with a financial professional said they have positive perceptions of ESG investing, and over half (51 percent) of those currently not involved with ESG investing are interested in it.
“Financial professionals have a huge opportunity in front of them to proactively discuss ESG investing with clients,” said Hedtke. “It’s important to work with them to identify what issues are important and help them build their portfolio in a way that reflects their values.”