WSJ: Millenials' Passions Haven't Affected How They Invest

Published March, 2020

By Dieter Holger And Sabela Ojea

Despite feeling strongly about the environment and other causes, most millennials have never heard of, or don’t fully understand, ESG investing

Millennials may be more passionate about environmental and social-justice causes than previous generations, but those values have yet to make a significant impact on how they invest.

Part of the disconnect, according to a survey conducted in September 2019 for The Wall Street Journal by MarketCast, is that many millennials simply aren’t familiar with socially responsible investing or don’t want to commit to it until they become more financially literate.

Katie Irwin, a 33-year-old accountant who works for the state of Colorado, has been investing for three years. She says that while she cares about how her investments might impact the causes she supports, she needs to learn more about finance before she starts investing based on environmental, social or governance (ESG) criteria.

“I want to be able to understand where and why and what I am investing in,” says Ms. Irwin, who has a pension plan through her job and a target-date fund through Vanguard Group.

It is a familiar theme for many in her generation.

According to the survey, the top passion causes among millennials, defined as those born between 1981 and 1996, are climate change at 41%, followed by human rights, poverty reduction and safe work environment, each at 39%, and environment sustainability at 38%.

The same survey also found that nearly half of millennials want to start investing but don’t know where to begin, and an overwhelming 87% of millennials had never heard of ESG investing. After the concept was explained to them, 44% said they would be interested in socially responsible investments vs. roughly a quarter of Gen-Xers and baby boomers.

“With some continued confidence and education, we may see ESG funds grow among millennials as the interest is there, but the familiarity isn’t,” says Kelly Lanan, vice president for young investors at Fidelity Investments Inc. Among Fidelity’s millennial clients, none of the top 10 most popular passive mutual funds by invested assets focus on sustainability.

Drawn to tech stocks
Among millennials who do invest, work-sponsored 401(k) plans are the most popular financial product at 41%, the survey found, followed by individual retirement accounts at 25%. About 19% say they invest in mutual funds and exchange-traded funds, while 15% invest in individual stocks.

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