SUSTAINABLE INVESTING is no longer the new frontier of portfolio building — it’s gone mainstream. Many millennials want to make money on their investments and feel good about it at the same time. That’s going to have a huge impact on financial markets — this generation will be inheriting and investing $36 trillion over the next 45 years.
Millennials are driving the concept of dual investment objectives — earning returns that also help build a better world — to the forefront of investment strategy, partly because they are so wedded to technology.
With more people connected to the world pretty much all the time, there’s an increased awareness of the range of long-term issues plaguing our planet’s population.
Just a generation ago, it was easier to distance yourself from water and energy conservation problems and food shortages happening halfway across the globe. A few decades ago, it would have been excusable to be unaware that many people lacked access to quality education, financial services, and health care here in the United States.
Social media have connected most of us in a way that sends a clear message about the importance of investing in a better future.
Although it’s already made a name for itself among millennials, sustainable investing in the future will contribute to a rising trend in more concentrated efforts on sustainable business practices and corporate social responsibility initiatives. As people have begun to readjust their attitudes toward the rewards of investing in philanthropic and financially competitive prospects, large institutions have started to follow suit. Individuals are not only making active choices to support institutions that are investing their capital in a socially responsible manner; they are demanding it from those that are not.
In Massachusetts, we have already seen this theory hold true. A coalition of religious and nonprofit organizations, university students, and municipal leaders have been calling for the removal of fossil fuel companies from institutional endowments, organizational investments, and public employee retirement trust funds. The state Legislature is considering a bill that would require the state pension fund to identify and divest any direct investment in fossil fuel companies over the next four years. The bill comes with a safeguard that would allow the fund to reinvest in fossil fuels if divestment financially harms the pension system.
Sustainable investment practices have transformed the dynamic of the investing market, coloring what was once viewed as a black-and-white field with a lot more gray. They also make philanthropy more accessible to people who are not necessarily wealthy. In the long run, the return on such investments will bode well for us as individuals, and as a society.
Ruven Rodriguez is a financial adviser with the global wealth management division of Morgan Stanley in Boston.