Heading 1: Young Investors Prioritize Personal Values in Their Investment Strategies
Heading 2: Aligning Investments with Personal Values Gains Importance Among Young Adults
When it comes to investing, Hannah Cohen, a 25-year-old data consultant, seeks out companies and funds that align with her personal values. For example, Cohen has invested in funds like the ALPS Clean Energy ETF and the Global X Autonomous & Electric Vehicles ETF as someone who cares about climate change. On the other hand, she avoids big-oil stocks that contradict her beliefs. By doing so, Cohen believes she is sending a message and actively participating in causes she cares about.
Heading 2: Survey Highlights the Growing Trend Among Gen Z Investors
Recent survey data reveals that Cohen is not alone in her investment approach. A July survey by U.S. Bank, conducted among 4,000 current and aspiring investors, indicates that nearly two-thirds of Gen Z investors want their portfolios to support causes they care about. In comparison, 59% of millennials, 45% of Gen X, and 30% of boomers share the same sentiment.
Furthermore, the survey shows that young investors are even willing to sacrifice returns to ensure that the companies they invest in align with their beliefs. Over four-fifths of Gen Z and millennials stated that they would be willing to underperform the S&P 500’s average return of 12% over a 10-year period. In contrast, only 73% of Gen X and 65% of boomers expressed the same willingness.
Heading 3: Investment Strategies Evolve to Reflect Personal Values
Matthew Ivler, a 23-year-old machine learning engineer, began his investment journey during the market crash caused by the pandemic in March 2020. Initially, he focused on single stocks that provided consistent dividends. However, his strategy shifted to primarily investing in exchange-traded funds (ETFs), which allowed him to align his investments more closely with his values.
While Ivler recognizes that he may indirectly invest in companies that disagree with his values through ETFs, he still prioritizes selecting individual stocks that reflect his fundamental beliefs. For instance, he sold his holdings in Home Depot due to controversies surrounding the company’s political donations. He also reduced his exposure to Chevron, a big-oil stock, in favor of renewable energy companies as his climate-consciousness grew.
Heading 3: Expressing Identity and Signaling Values through Investments
According to Julie O’Brien, the head of behavioral science at U.S. Bank, young adults inherently seek ways to express their identity. Investing becomes a means through which they can proclaim, “This is the kind of person that I am, and now I get to act in a way that’s in line with my identity.” By investing in companies that align with their values, they are able to send a signal to others.
O’Brien suggests that younger generations feel a stronger connection to environmental, social, and corporate governance (ESG) issues due to increased access to information and the prevalence of social media. Investing provides them with another platform to engage with these issues and show their support.
Heading 4: Minority Investors Find Empowerment in ESG Investing
For Dylan Assi, a self-described visible minority, ESG issues are harder to ignore when personally investing. Assi, a 22-year-old who works in real estate private equity and investing, believes that fundamentally doing the right thing is something that needs to be done. He looks for companies that have a track record of backing up their public statements with action.
Assi encourages young investors to focus on companies that support ESG trends more broadly, rather than expecting perfection. He cites Apple and Microsoft’s sustainability efforts in the cloud as examples of companies making a positive impact in the ESG space.
Heading 4: Challenges and Benefits of ESG Investing
While many young investors like Cohen and Assi prioritize investing in companies that align with their values, they face challenges in finding trustworthy research on a company’s ESG rankings and actions. The availability of expensive screening software limits their access to comprehensive data. Nevertheless, they believe that maintaining an ESG focus in investing is beneficial and does not necessarily require sacrificing profits.
O’Brien emphasizes that taking an ESG-focused approach to investing helps young investors make their financial goals more tangible and concrete. In a time of uncertainty and an abstract future, investing becomes not just about money and math but also about psychology and navigating the complex landscape of human values.