Contrary to the perception that millennials are most likely to be leading the way on ethical investing, research from Michelmores has suggested there is a disconnect between their social values and investment behaviour.
Carried out among 501 'affluent' millennials - those with £25,000 or more to invest - the study found although 73 per cent said they felt a sense of responsibility to use their money in a way that had a positive impact, only 16 per cent have actually invested in sustainable or social impact funds.
According to Michelmores, this lack of action coincided with a lack of understanding and information about how such environmental, sustainable and governance investments actually perform and fit within a portfolio.
The study revealed 62 per cent of millennials said they believed impact investments were less profitable than other types of investment, while 14 per cent admitted not knowing one way or the other.
Richard Cobb (pictured), partner at Michelmores, said: “While affluent millennials recognise the importance of impact investments, this rarely translates into action.
"Studies show that social funds can be just as financially beneficial as conventional investments, yet our research shows that confidence to invest in a sustainable way is relatively low.”
To help turn this around - especially as the great wealth transfer is set to see trillions flow from older generations to the younger generations - Mr Cobb said it was vital that these potential investors got the proper information, in an accessible format, to help them make their decisions.
He said: “To make sure millennial investors are able to align purpose and profit, it is critical that high-quality data surrounding impact investing’s positive financial return is more accessible.
"With the right strategy in place, there is no reason why social funds can’t be as profitable as traditional investment, if not more so. Financial advisers have a key role to play here in educating their clients, and when we see impact investment regularly feature as part of the conversation, we expect it to take off in a big way.”
Amy Sutherland, actuarial consultant at Hymans Robertson, said in response to news earlier this year that the UK government plans to bring forward a ban on selling new petrol, diesel or hybrid cars in the UK to 2035, investment managers not getting on board would find shareholders eventually vote with their money, while trustees would find pension scheme members would put increasing pressure on workplace schemes to consider ESG.
Ms Sutherland commented: "While one of the big excuses trustees currently give for not taking responsible investment seriously is the potential compromise of returns, we will start to see the lack of adaptability to a low-carbon world impact returns far more than stubbornly remaining in less than favourable funds and industries.
“In terms of asset managers themselves, some are seen to be falling behind others in terms of climate awareness and announcements like the government's will start to weed out those whose promises are empty words."
simoney.kyriakou@ft.com
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