Millennials driving growth in impact investment in Australia

A survey of over 1,000 Australians highlighted millennials are the generation most interested in impact investing – with greenwashing remaining an issue for all investors.

Millennials and Gen Xers are leading the rise of impact investing in Australia, according to a new survey which shows the appeal of impact investing has reached an all-time high.

The survey, by global asset manager American Century Investments, showed nearly three in five Australian respondents (57 per cent) find the concept of impact investing appealing with the interest highest among millennials (68 per cent) and Gen Xers (60 per cent).

Further, the research showed millennials were not only the most likely to currently invest but also the most likely to plan to invest within the next five years.

Sarah Bratton Hughes, senior vice president and head of ESG and sustainable investing for American Century Investments, said there was a clear rise in demand for impact investing opportunities globally, including in Australia.

“We see a rising demand across geography, generation and gender, along with favourable economics and a supportive political and regulatory environment that will drive changes and advances in sustainable investing over the coming year,” she said in a statement.

It marks the fifth impact investing survey released by American Century Investments, but is the first time the study has included Australia in its research.

The report found familiarity with impact investing is lower in Australia than in the US and UK but significantly higher than in Germany – the same holds true with respect to the appeal of impact investing.

Among those familiar with the concept in Australia, social media is the top source of information about impact investing.

There is a division along gender lines. Aussie men are significantly more likely than women to have current investments in stocks, bonds, mutual funds or exchange traded funds, and are much more familiar with the concept of impact investing.

By comparison, nearly two-thirds of women are unfamiliar with impact investing, but over half find the concept appealing.

Investors show willingness to sacrifice returns

Globally, the report found a significant, and increasing, share of people are willing to sacrifice returns for a positive impact.

Again, this trend is being driven by millennials. In Australia, 45 per cent of millennials said they were willing to sacrifice returns for a positive impact, compared with 50 per cent of those in the US.

But Bratton Hughes said in their view, this trade off isn’t necessary and isn’t the future of sustainable investing. 

“Sustainable investing is more than just a risk mitigator. We believe it’s an alpha generator,” she said.

“This is alpha plus: sustainable and impact strategies have the potential to provide market-beating returns coupled with societal and environmental alpha.”

The top cause for Australians (30 per cent) was the environment and climate change. This is similar to in the UK (34 per cent) and Germany (34 per cent), but differs from the US where the top concern was health care and disease prevention and cures (25 per cent).

The issue with greenwashing

Greenwashing concerns continue to increase, with more than half of respondents (51 per cent in Australia) believing the practice has increased.

However, the survey showed this is not deterring appeal to invest in the for-purpose investing space.

Bratton Hughes said they expected greenwashing not only to remain a concern, but to expand beyond environmental or climate claims to claims related to all sustainable development goals.

“The combination of regulatory pressure, investor demand and industry cooperation will help drive clarity, consistency and transparency across the sustainable investing space,” she said.