ESG - Do Millennials and Gen Z Invest Differently?
The two generations of Millennials (born 1981-1996) and Gen Z (born 1997-2010) will strongly shape the financial world in the coming decades. They are different from all previous generations in many ways. But do they also invest differently than their predecessors?
Millennials and Gen Z will soon take the lead when it comes to investments. Over CHF 30 trillion is expected to pass from older generations to the Millennials and Gen Z.
The general contrast of these two generations to their predecessors is clear. They have been shaped by digitalization, have grown up with the Internet, and have been exposed to more and more ideas and currents. One of the core topics that concerned these generations the most was sustainability.
And so we come to Sustainable Finance. As the supply in this sector continues to grow, curiosity about the demand naturally arises. In this case, specifically regarding the demand of these two younger generations.
Millennials clearly more sustainable than average
Millennials, for example, buy twice as much from sustainable brands than average, are much more likely to work for a sustainable company, and invest - yes - twice as much in companies with an environmental or social focus than average.
Young generations invest more willingly to take risks
Both Millennials and Gen Z are investing more in equities. In Gen Z, 28% already have equities as part of their own portfolio, while Millennials have 29%.
Gen Z in particular is interested in fund solutions in retirement planning. In recent years, the willingness to invest in funds with an equity component of over 20% as part of private pension provision has even doubled.
Long-term positive indications for sustainable ESG investments
Millennials and Generation Z invest more in sustainable investments on average. For them, it is important that the companies they invest in share their own values. One of their top priorities is sustainability. Both generations will decide on the majority of financial investments in the future.
Accordingly, all indications are that investments will continue to move in the direction of sustainability. ESG ratings are becoming an increasingly important factor in investment decisions, steering investors' money toward sustainable companies.
Quality and transparency of ESG ratings essential
A key point here is the quality and transparency of the ESG ratings. GGX collects the ESG data manually (human intelligence), so the rating is not distorted and remains true. Furthermore, we at GGX disclose all our ESG data points to make the rating comprehensible for investors. Thus, we guarantee the best quality and transparency for sustainable investing.
About the author
Mauro Baumann is an apprentice at St.Galler Kantonalbank and completed an internship at Global Green Xchange as part of the KV4.0 practical year. He became interested in the world of investments early on with an interest that will probably never be exhausted.