Why Millennials and Generation Z Love Impact Investing
If you were born after 1980? Greed, in and of itself, was never good.
Millennials and Generation Z catch flak for their spending habits and are often blamed for adversely affecting industries like diamonds, shopping malls and even the housing market. Investing, however, is one area where they are clearly changing the game for the better. The reason is simple: impact investing.
What is impact investing?
It is a strategy that prioritizes businesses that have a positive impact on society and yield positive returns. Enthusiasts focus on companies solving problems around sustainability, climate change, poverty, healthcare and education. The term was coined back in 2007, but its prevalence has only increased in the decade-and-a-half since.
The Global Impact Investing Network published the following tenets of impact investing that are central to the concept:
Investment with return expectations
Range of return expectations and asset classes
Intentionality focuses on the desire to have a positive impact on some element of society by funding a company's cause.
Investors are still anticipating a return from their investments, over time, which differentiates impact investing from charity donations. While many still believe that investing is purely to drive profit and any "do good" efforts should be accomplished via charitable causes, impact investing brings together the best of both worlds.
Lastly, impact measurement is crucial to the overall concept. Rather than putting money behind a company, and trusting that the benefits to society will be realized, practitioners are intentional about following the trajectory of their funds and monitoring the progress over time.
Related: Business Success For Gen Z Entrepreneurs: How To Reach the Top Of Your Game
How popular is this with the 40-and-under investors?
One study found that 52% of Millennial investors consider the social responsibility of their investments to be an important selection criteria. In contrast, only 42% of Gen X investors and 30% of World War II-era investors felt the same.
GIIN also found that between 2014 and 2017, the amount of money being put towards impact investing increased by a factor of ten. The 2017 figure was estimated at $139.9 billion, and it's almost certainly significantly higher today.
In 2020, the world's largest asset manager, BlackRock, even got into the impact investing space with the BlackRock Global Impact Fund, signifying that this trend isn't going anywhere anytime soon.
As for the mindset behind this movement: According to Statistic, there were over 72 million Millennials in 2019, compared to 69 million Baby Boomers and 65 million Gen X-ers. The oldest in the age bracket are currently in their peak income-earning years and their spending power is only expected to increase as Baby Boomers reach old age and pass down their earnings through inheritance. In short, Millennial and Gen Z investors already make up a significant dollar share of the market, and that's only expected to increase.
They are actively involved in various social and political causes and learning that it's possible to carry that same passion into other opportunities. Impact investing is a natural expansion of the cause-driven movements that attract young people every day. Combine that with the ability to save for a promising financial future, and it's a no-brainer for these young investors to want their funds to serve a dual purpose.
Related: 5 Ways That Gen Z Differs from Millennials That You Must Take Into Account When Promoting Your Business
The future of this following
As a Millennial impact investor myself, I look forward to watching mainstream strategies evolve over the coming decades. Rest assured I'll be keeping an eye on the progression of profits-with-purpose and will share my updates as the movement evolves.
Related: Here's Why Not Being on TikTok Is a Huge Mistake
Entrepreneur Editors' Picks
How an Encounter With the 'Armpit of Destiny' Helped the Founder of Grubhub Take His Business From His Apartment to a $2 Billion IPO
You Can Train Your Brain to React to Stressful Situations Better. Here's the 3-Step Process.
A Disastrous Valentine's Day Inspired This Founder to Launch Her Own Floral Brand. It Became a Celebrity Magnet With Retail Revenue Up 450% Since 2019.
What Is Your Dream Job? Ask Yourself These 4 Questions to Find Out.
This Is the Crazy Process This Juice Franchise Went Through to Get USDA-Certified Organic. But It Sure Has Paid Off.
No One Would Rent Me a Café in Trendy NYC Neighborhoods, So I Tried Something Risky. Now I Have 3 Coffee Shops.