Young investors care about people, communities and the planet

A new wave of investors is seeking products and solutions that align with their values, including environmental, social, and governance (ESG) factors. As a result, asset managers must adapt by offering innovative ESG solutions that resonate with the ethical considerations of younger investors.

A case study in sustainable investment

A prime example of how asset managers are adapting to these new priorities is the Sanlam Living Planet Fund. Launched by Sanlam Investments in collaboration with the World Wide Fund for Nature (WWF), the fund is designed to align with the sustainability values that millennials and Gen Z prioritise. It focuses on investing in companies that demonstrate strong ESG practices. This includes companies that actively work to reduce their carbon footprint, promote social equity, and maintain robust governance structures.

The Sanlam Living Planet Fund is not just about avoiding negative impacts; it actively seeks to create positive change. It invests in renewable energy projects, sustainable agriculture and companies that are leading the way in corporate social responsibility. This proactive approach resonates with millennials, who are known for their desire to make a tangible difference through their investments.

Why funds focused on sustainability are a good match for millennials

Several factors make these funds particularly appealing to young investors:

• Transparency and accountability: Millennials demand transparency in how their money is being used. These funds provide detailed reports on their investments and their impact, ensuring investors can see the real-world effects of their investments.
  
  
• Alignment with personal values: Many millennials prioritise sustainability and ethical considerations in their daily lives. By investing in these funds, they can ensure their investment choices reflect these values.
  
  
• Long-term growth potential: Sustainable investments are increasingly being recognised not just for their ethical value, but also for their financial potential. Companies with strong ESG practices are often better positioned for long-term growth, making these funds an attractive option for future-focused investors.
  
  
• Active engagement: The fund managers of the Sanlam Living Planet Fund actively engage with the companies they invest in to promote better ESG practices. This means investors are not just passively contributing to change but are part of a dynamic process of pushing for improvement.

Future of sustainable investing

The sustainable investment universe is still in its early stages, but the potential for growth is immense. As millennials and Gen Z continue to enter the investment market, the demand for products that align with their values will likely drive the development of new financial solutions. This generational shift could act as a catalyst for ESG investing to reach unprecedented levels of demand.

Meeting the evolving needs of future investors not only presents a significant opportunity for financial institutions, but also challenges them to innovate and rebuild trust with a new generation of clients. The market growth in sustainable investing, driven by demographic changes and macroeconomic trends, will continue to shape the future of finance.

As BlackRock CEO Larry Fink says, “Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance but also show how it makes a positive contribution to society.”

• About the author: Rudesh Patel is the head of Sustainable Investing at Sanlam Investments Multi-Manager.

Download the 2024 Sanlam ESG Barometer report

Now in its second edition, this annual report — researched by Krutham and published in partnership with Business Day — examines evolving ESG dynamics and how listed companies in SA and Kenya are enhancing environmental and social outcomes through their operations. Click here to download it.

This article was sponsored by Sanlam.

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