Over the next 30 to 40 years, $30 trillion in assets is expected to pass down from baby boomers to their heirs. According to Accenture, this represents the greatest intergenerational wealth transfer in history.
This shift already is beginning to have profound effects on the economy. Millennials, who will soon overtake boomers as America’s largest generation, tend to support and invest in companies in part on the basis of values, shifting the criteria that determine which publicly traded companies prosper and which ones lose market share.
Millennials have distinct experiences and priorities that shape their spending and investment habits. Finance industry professionals will need to forge a deeper understanding of this next generation of investors and design programs to meet their specific needs.
This generation cares deeply about the environment and tends to spend and invest in companies that make sustainability a priority. After witnessing corporate scandals throughout their lives, they expect and demand transparency. And, having come of age during an historic recession, millennials also are highly wary of the stock market’s unpredictability and take far fewer risks when it comes to investing.
In 2015, the United Nations outlined a number of Sustainable Development Goals that it aims to reach by 2030. The goals, known as SDG, address issues such as poverty, inequality and climate change. The UN is encouraging investment in businesses that align their products and practices with these goals.
To help investors identify companies with sustainable business practices, the United Nations also has backed the environmental, social and governance (ESG) criteria, a set of standards for a company’s operations. ESG includes guidelines for employee and customer relations, responsiveness to climate change, and involvement in the communities in which a business operates.
To spur investment in sustainable companies and those with humanitarian missions, the New York Stock Exchange published the Principles of Responsible Investing (PRI) to advance the integration of ESG into analysis and decision-making. Today, PRI is a global initiative with more than 1,600 members, representing $70 trillion in assets under management. The increasing pressure on businesses to comply with sustainability practices, as well as millennials’ deep concern for the environment, will no doubt have economic implications for decades to come.