Millenials turn to pensions for responsible alternative investments

Millenials are more likely to use their pension to invest responsibly than any other investment vehicle, according to new research.

Though you might expect them to be more at home using an online crowdfunding platform or a mobile trading app, millennial investors told surveyors from The Wisdom Council that they would use their corporate or personal pension to invest in responsible strategies if the option were available.

Some 37 per cent of those polled by The Wisdom Council said they were most likely to invest in ethical funds via their pensions, with the same proportion saying they would focus on environmental, social and governance (ESG) investments this way.

Two in five respondents (43 per cent) said they would focus on green funds, while a third (34 per cent) said they would want to focus on impact investments made through their pension.

The Wisdom Council’s head of investor research, Josh Blundell, said that pensions represented an “interesting route to market” for responsible investment products to reach investors.

He added: “This is where we should be encouraging more young people to invest – for example, through automatic enrolment.”

Moreover, the vast majority of millennials – nine in 10 who were questioned – said they were keen to learn more about responsible investment in general.

This interest only got stronger among older millennials – those born in the 80s and early 90s as a rule – with 71 per cent of those aged between 25 and 34 saying they would part with an investment if a company was demonstrably acting irresponsibly. This was also true for two-thirds (67 per cent) of those aged between 18 and 34.
Millennials also became more interested the wealthier they were, too, suggesting that choosing alternative investment styles is not just a concern for those not looking to make good returns.

According to the research, 67 per cent of those who already held £500,000 worth of investments were interested in responsible products. This was true for 57 per cent of those with somewhere between £100,000 and £500,000 to invest, and also for 48 per cent of those with investible capital worth between £20,000 and £100,000.

This does not square entirely with other research conducted in recent months that suggests Millennials are failing to save money for their futures.

According to the Wells Fargo Investment Institute, up to 41 per cent of Americans between the ages of 17 and 35 do not have any sort of pension savings to speak of. However, of those that Wells Fargo polled, 34 per cent said they had outstanding student debt of an average of $20,000.

Charles Schwab’s recent research also suggests that Millennials are just as likely to turn to an ETF to provide returns. The firm’s survey of investors found that 56 per cent of younger investors say that ETFs are their vehicle of choice to save for retirement, with the majority planning to add to their holdings.

The Wisdom Council’s research was based on a survey of 1,000 investors carried out in September, carried out in conjunction with Good Money Week, Aberdeen Standard, Equiniti, M&G and Nutmeg.

It also found that 80 per cent of respondents were broadly interested in responsible investment. A quarter of those respondents said that a lack of familiarity with the sector or the responsible investment vehicles available was a key reason for not investing.

The Wisdom Council’s chief executive Anne Lane said responsible investment “resonated” with the majority of investors once it was explained in simple terms.

She added: “Socially responsible behaviours are becoming the norm – green and ethical issues have moved into the mainstream, while ESG and impact investing tap into a growing social awareness and desire to effect change."

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