Morgan Stanley report on Wall Street sustainability, millennials



A
fan crowd-surfs at the Lollapalooza music festival in Grant Park
in Chicago.


Reuters/Jim
Young



  • Millennials are driving the nearly $9 trillion
    sustainable investing market, according to a survey of 1,000
    investors by Morgan Stanley’s Institute for Sustainable
    Investing.
  • Despite recent strides in the space, the belief that
    sustainable investing solutions deliver weaker returns remains
    prevalent.

Millennials aren’t just eating avocado toast and snapchatting;
they’re also driving the growth of a $9 trillion market on Wall
Street: sustainable investing.

Sustainable investment products, which aim to deliver
outsize returns and remedy societal and environmental ills, have
grown at a rate of more than 33% between 2014 and 2016 in the US,
according to a newly released report by Morgan Stanley. The market
for such products, as a result, has grown from $6.57 trillion to
$8.72 trillion.

Morgan Stanley’s
“Sustainable Signals” report
, a sequel to a
2015 report on the subject conducted by the bank’s Institute
for Sustainable Investing, examines the findings of an
impact-investing-focused survey of 1,000 active investors across
the age spectrum. It found that millennials have underpinned the
growth of the market for impact investing and the adoption of
sustainable portfolio options and other products such as
green bonds
and
green ETFs
.

Millennials “are twice as likely as the overall pool to
invest in companies or funds that target social or environmental
outcomes,” the report said. 

Millennial interest has grown since 2015. From 2015 to
2017, interest in sustainable investing grew from 84% to 86%,
while those who said they were very interested in impact
investing grew by 10 percentage points,
to 38%. 
 


Screen Shot 2017 08 09 at 10.30.14 AM
Millennials’ interest in impact investing leads the
general populace.

Morgan
Stanley


According to the report, the rise of interest in sustainable
investing stems from sustainable behavior in the consumer
space. According to the report, millennials are twice as
likely to buy goods from sustainable companies than the total
population. This behavior has been bleeding into financial
services, according to Audrey Choi, chief sustainability officer
and chief marketing officer at Morgan Stanley.

“As widespread attention to sustainability continues to increase,
consumers and investors alike are now more than ever factoring
sustainability issues into their investment decisions,” she said
in a press release emailed to Business Insider. 

“What we are seeing right now is just the tip of the iceberg,”
Amit Bouri, cofounder and chief executive officer of the Global Impact Investing Network, told
Business Insider. “In the coming years, budding interest will
translate into more and more concrete action on the part of
financial-services firms.” 

This, according to Bouri, will pour unprecedented amounts of
capital into funds focusing on environmental and socially
beneficial objectives. Already, money managers such as UBS have
taken key steps to provide clients more impact-investing
offerings. 

The Switzerland-based bank told Business Insider that its
sustainable investments grew by about $40 billion in 2016. Those
investments now make up about 35%, or more than $970 billion, of
the bank’s “total invested assets.”

Mounting skepticism 

Still, investors have their reservations about sustainable
investing. On the whole, investors (including millennials) think
that conventional investing options yield larger
returns. 

More than 50% of investors believe sustainable investing
“requires a financial trade-off,” according to the report, with
more than 59% of millennials subscribing to what Morgan Stanley
describes as the main myth hanging over the space. 


Screen Shot 2017 08 09 at 3.05.36 PM
As interest in sustainable investing has increased, so
too has skepticism about the profitability of such investing
options.

Morgan
Stanley


“There’s a natural inclination to think impact investing is too
good to be true,” Bouri told Business Insider.

He said investors have a hard time believing they can have their
cake and eat it too. That is to say, invest in a sustainable way
and make money.

“We have conducted research — and we found across a number of
studies, risk adjusted rates of return are achievable,” Bouri
said. “We compared sustainable funds to convention funds and the
opportunities are in line with the norm.” 

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