At age 25, Kevin Guardia has already been investing for nearly half his life. Guardia’s father opened a small brokerage account for his son when Kevin was in junior high, and the young man started to dabble in buying and selling stocks just as the long rebound from the financial crisis got underway.
Investing professionals have long expected the Guardia family dynamic to unfold across financial markets as a younger generation comes of investing age. Millennials and Generation Z may get blamed for “killing” plenty of old traditions, but they’re also seen as having a lot more heart — and awareness — about how their dollars impact the world. And in the immediate aftermath of two financial market shocks — one from the collapse in oil prices CL00, -0.
In its 2020 global exchange-traded-funds investor survey, taken ahead of the full force of the pandemic, Brown Brothers Harriman found that an estimated 74% of global investors plan to increase their ESG exchange-traded-fund allocation over the next year. Almost one in five investors said they would allocate between 21% and 50% of their portfolios to ESG funds in five years. BBH, in its report, concluded that ESG “doesn’t appear to be a passing fad.
There’s a solid chance that if you’ve put some of your own money in a fund marketed as sustainable, you might be surprised and disappointed at the way those ideas are interpreted by the fund manager. That manager may in turn think she has a great “values” idea, but is hamstrung by archaic or inflexible industry customs.
She also said that, as a woman-owned firm, her company checks more of the “governance” boxes in the ESG playlist than the massive corporations behind funds like X-Trackers S&P 500 ESG. The SPDR Gender Diversity Index ETF SHE, +0.04% has as a top five holding shares of Wells Fargo & Co. WFC, -1.18%, a poster child for bad governance, some would argue, in the wake of its widely reported customer abuse.
A partial explanation for the outperformance of sustainable equity funds over traditional ones lies in their being underweight energy stocks during a period of significant underperformance by that sector, such as in 2019, even before the COVID-linked oil-price crater. Diversified sustainable U.S. equity funds have about a 1.9% average energy weighting, compared with 3.9% for the S&P 500 SPX, +0.23%.“ ‘ESG is in many ways the new active investing.
Jackie Liu, co-chair of San Francisco law firm Morrison & Foerster’s global corporate department, also questioned why there’s a lingering underperformance stigma, considering that institutional investors with long-run future returns at stake for trillions in holdings — large pension funds, including CalPERS, among them — have led the conversion to sustainable portfolios.
Another increasingly popular approach is likewise an about-face from the traditional divest-from-the-violators concept, and urges investors to fight for change because they have skin in the game. Suz Mac Cormac, corporate partner at Morrison & Foerster, who chairs its energy and social enterprise and impact-investing practices, represents clients who see merit in “fighting from the inside.”
The term handing over the keys is funny. Boomers are having the keys ripped from their aged hands. It is difficult for boomers to think of any generation but their own. And now trying to predict millennial investment strategies looks like madness in their eyes. TSLA, FB, BTC?
No we're not. We just want whatever prints $$$, just like Boomers.
Smart people of all ages invest in things that make them $$ , go to Church if you need to heal your conscience.
The market is gonna chew up and spit out that conscience.
🙄
Uh, I think millennials're trying to make up for lost time, whether by investing in socially responsible companies or not. Boomers're trying to protect their hard-earned livelihood, not handing anything over. Political headline. Focus on the numbers. Don't be like everyone else.
I'll invest in anything that will make me money
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