Millennials and Impact Investing

According to an impact investing article from earlier this year, millennials are driving an increasing trend toward impact investment and away from traditional charitable giving.  The article addressees a 2021 study by Fidelity Charitable that revealed millennials are much more likely to engage in impact investing than older investors.  The study examined impact investing and charitable giving among 1,216 US investors, who have at least 25,000 in investable assets from sources other than an employer retirement plan.  Approximately 61% of millennials reported that they had participated in impact investing.  Tellingly, 62% of millennials reported that they believed impact investing has a greater potential than traditional philanthropy to “create long-term positive change.”  In sharp contrast, 72% of baby boomers reported that charitable giving rather than impact investing was the better course to create meaningful change.

Scott Nance, Vice President of Impact Investing at Fidelity Charitable, has remarked, “The trend toward values-based investing will only grow as millennials come to control a larger share of wealth.”  Millennials are focused on having their broader values and social good align with their investments.    The study also revealed that only one third of all investors engage in impact investing.  However, 40% of those surveyed responded that they would consider making their first impact investment in 2022. Of those investors who already participate in impact investing, 41% plan to dedicate an even greater amount to impact investments.

Among the participants, the most cited barrier to participation in impact investing is a lack of knowledge.  Interestingly, of those already participating in impact investing, 42% learned about it from a financial advisor and 30% from an investment firm. The most common vehicles for investment among those surveyed are mutual funds or individual publicly traded companies that meet criteria along environmental, social, or governance themes.  Of these three themes, environmental was at the top with half of impact investors polled citing it as their top concern.   Social themes garnered the second spot with 27% whereas governance themes came in last with 16%.

As discussed in yesterday’s post, it is interesting to note the ways that impact investing may work in tandem with traditional philanthropy.  Fidelity commented upon its Giving Accounts, which allows donors to combine philanthropy with impact investing.  Its Giving Accounts saw a 67% increase in assets allocated to impact investments, raising the total to $3 billion in 2021.  

 

Khrista McCarden

Hoffman Fuller Associate Professor of Tax Law

Tulane Law School