While sustainable investing has become more common, there remains plenty of skepticism about its value and its place in a portfolio.
But that’s not the case for Generation Z. This generation of people up to age 26, who are either finishing school or starting their professional careers, has grown up immersed in a world surrounded by environmental and social concerns. For many of this generation, sustainability is not a secondary concern, it’s the main concern.
I know this because it’s my generation. Since elementary school, my peers and I have been exposed to messages about protecting our earth like “reduce, reuse, recycle.” We’re a generation that supported eliminating plastic bags and plastic straws--and seen that goal achieved in many places. People of our generation like Greta Thunberg have become the voice for the concerns that many of us have. We actually use phrases like “carbon footprint” and “climate change” in conversation.
However, it’s not one-size-fits-all when it comes to how we express that in our choices, either personally or as emerging investors. While a small percentage of us will go on to be activists or choose careers related to effecting change, most of us will begin careers in professions far removed from direct involvement in ESG.
That choice of career or life paths won’t change our commitment to the topics and causes. One of the most important ways for us to stay tied to these goals while we build our lives is to choose investments that express our values.
I’m going to assume most of us are perfectly clear on the “E” in ESG. That makes it pretty easy to decide what to invest in or avoid based on what we know about a public company. What is more subtle are the "S" and "G", and this is where we could use professional advice. Social issues, such as Black Lives Matter, are central concerns for Generation Z. What opportunities are out there that support companies or infrastructure projects that could reflect that? We’d like to put our money where our values are.
Governance is another area that requires deeper knowledge an investment professional can advise on. What companies have opaque supply chains that might involve child or unethically compensated labor? Which ones are wasting the earth’s fresh water? Governance can also literally mean a company’s governance. What a groundbreaking win it was that Engine No. 1 got seats on Exxon Mobil’s (XOM) board; the company, unlike such competitors as BP (BP), had virtually vowed never to go green. But is change from the inside enough? It’s worth a discussion when considering direct investment or funds that contain Exxon or similar companies.
And, of course, politics is personal. Which companies supported marriage equality? Which value diversity in their workforce? These are issues that are not easily analyzed, which is where professionals and ESG tools can help. Despite growing up with the Internet, smartphones, streaming services, social media, and access to more information in the shortest period of time than any other generation before us, that in itself does not automatically make us knowledgeable investors when it comes to how to express our values while simultaneously investing for personal goals (a house, retirement, and so on).
Of course, investment professionals are also surrounded by information, but they wouldn’t necessarily know how to get up to speed on Gen Z. One resource I recommend is a survey by Deloitte called "A call for accountability and action." While nominally a survey of Millennials, the generation ahead of us, it gives a good sense of what Gen Z cares about and what our world view is.
While we are young, we did live through the global financial crisis and saw what effect it had on our parents, we have studied it in school, and we see the effects it still has on our world today as we enter the workforce. Because of that and our exposure to vast amounts of information on financial literacy available, we are extremely conscious that finance matters and we want to set ourselves up for a secure future. However, we want to invest in a way that respects and reflects our values and our goals not only for our future but for the future of the earth, society, and our fellow world citizens.
