Half of millennial investors now have a social impact fund as part of their portfolio, as more and more youngsters opt for the alternative option, a study has found.
A report from Barclays published today (25 July) found the number of what it classed as millennials, who hold assets in a social impact fund, has jumped 20 per cent in the past three years.
Barclays spoke with 2,000 investors, and found the number of millennial investors investing ethically has risen from 30 per cent to 50 per cent in the years since 2015.
The company said 40 per cent of the investors under the age of 40 to whom it spoke have made at least one investment into an impact fund.
But the data showed a deep divide between millenial investors and those of an older generation when it comes to interest in such products, with younger investors four times more likely to own an impact investment fund than an investor from an older generation.
Barclays said a mere 9 per cent of investors within the 50-59 age group had made an investment into a sustainable product, while just 3 per cent of investors over the age of 60 had made such an investment.
Damian Payiatakis, head of impact investing at Barclays, said: "Younger generations are more naturally comfortable combining financial and societal ambitions when investing.
"However, it’s the older generation who have more investible wealth today and whose choices will be significant in shaping the investment market and the world their children and grandchildren live in.
"They also have been investing over a longer period, so we’re working with existing portfolios that need to be transitioned with their preferences and the new impact investments becoming available – a process that isn’t always simple."
He added if impact investing was to truly enter the mainstream and become integrated into regular investment processes, the industry will need to build an approach that captures the interest of the whole spectrum of investors.
James Rainbow, co-head of the UK intermediary business at Schroders, said his firm regards the investment it has made into sustainable investment products to be part of a very long-term strategy.
He said while younger investors have more interest in sustainable investment products, they presently have less capital to invest.
The age at which retail investors begin to invest in a significant way is between the age of 45 and 55, meaning even the oldest of the millennial generation could be a decade away from reaching that point, and boosting the popularity of impact funds, he said.
But Mr Rainbow said the focus of his firm is to launch such products now, so that when demand picks up in the years to come, Schroders products focused on this area will have an established performance track record, providing the firm with an advantage relative to its peers.
Paul Gibson, an adviser at Granite Financial Planning in Aberdeen, said he has yet to see significant demand from his clients for products such as impact funds.
david.thorpe@ft.com
