MEDIA RELEASE: Australian millennials and Generation X are leading the rise of impact investing among local investors, according to a global study conducted by US-based asset management firm, American Century Investments.
The fifth impact investing study assesses the role of impact investing on society as well as perceived financial returns, with respondents from the US, UK, Germany and, for the first time, Australia, participating in this year’s study. Results were weighted by age, sex, geographic region, race and education to ensure reliable and accurate representation of the adult population in these jurisdictions.
The majority of respondents in the US (61 per cent), UK (63 per cent) and Australia (57 per cent) found impact investing appealing. Appeal was even higher among millennials and Gen Xers in the US (66 per cent and 64 per cent respectively); millennials in the UK (67 per cent); and millennials and Gen Xers in Australia (68 per cent and 60 per cent) in Australia.
While baby boomers generally found impact investing less appealing than the overall population, their interest has increased over consecutive years of running the study.
According to American Century’s head of ESG and sustainable investing, Sarah Bratton Hughes, there is a rising demand for impact investing across geography, generation and gender, along with favourable economics.
“This demand is further backed by a supportive political and regulatory environment that will help drive changes and advances in sustainable investing over the coming year.
“The combination of regulatory pressure, investor demand and industry cooperation will also help with consistency and transparency across sustainable investing, including alleviating any investor concerns around greenwashing,” she said.
The practice of greenwashing refers to inaccurate information or a lack of information, relating to a company’s sustainability practices, including its environmental credentials.
“We expect greenwashing not only to remain a concern, but to expand beyond environmental or climate claims to claims related to all Sustainable Development Goals, including those more aligned to social values such as diversity and inclusion,” she said.
The study also revealed the leading catalyst for a third of impact investors in the UK (34 per cent), Germany (34 per cent) and Australia (30 per cent) is the environment and climate change. As well, 30 per cent of Australian respondents cited health care/disease prevention and cures as a catalyst. In the US, 25 per cent of respondents cited the top impact investing concern as health care and disease prevention and cures.
American Century has a unique perspective on sustainable investing. More than 40 per cent of American Century dividends go to the Stowers Institute for Medical Research, a biomedical research organisation with an equity stake in American Century.
Other concerns for Australian investors include improved education (10 per cent), racial equality and social justice (8 per cent), mitigating poverty (8 per cent) and gender equality (7 per cent).
Of particular significance is the increasing share of investors willing to sacrifice financial returns for a positive impact. In all, 38 per cent of US respondents reported a willingness to sacrifice returns for a positive impact, up from 33 per cent in 2020. Further, 50 per cent of US millennials are willing to sacrifice returns for a positive impact, with similar numbers in the UK (49 per cent) and Australia (45 per cent).
“This trade off isn’t necessary and it is not the future of sustainable investing. Sustainable investing is more than just a risk mitigator; we believe it’s also an alpha generator. Sustainable and impact strategies have the potential to provide market-beating returns coupled with societal and environmental alpha.
“This alpha-plus approach will soon appeal to the majority of people who are either unsure or unwilling to sacrifice returns for a positive impact,” she said.
American Century Investments has identified five key themes which frame its approach to ESG and sustainable investing, and informs investment decisions across all funds and strategies. These include empowerment, sustainable living, environment, digitalization and health care to innovate solutions.
“These important themes shape our research agenda, engagement and proxy voting activities to not only contribute to transforming society but doing so while striving to deliver superior, long-term, risk-adjusted returns,” said Ms Bratton Hughes.