Move over Millennials there is a new gang in town and they mean business. Mindful, diverse and socially responsible business.
Generation Z: Leading the charge on socially responsible investing
Generation Z is the term given for those born between the 1995 and 2010. By 2020 they will account for 40% of consumers globally and companies that do not connect with this demographic will quickly lose their market share.
The first generation not to know life without social media, Gen Z have grown up aware of world affairs thanks to a 24-hour news cycle. This is reflected in their heightened ethical concern.
Using their collective buying power to advocate companies and brands that reflect their values, this generation are changing the business landscape. Companies need to pay attention to their corporate social responsibility or risk alienating Gen Z’s purchasing power.
They are equally driven to challenge those who are not ethically minded. Scandals and controversy cannot be hidden in the age of social media with key issues fast going ‘viral’.
The Power of Social Media
Gen Z understands the power of social media. In 2015 a marine biologist uploaded a video of a plastic straw being removed from the nostril of a live sea turtle on YouTube. Quickly becoming viral this video has now had over 35 million views and was the catalyst for the viral hashtag #stopsucking. Demonstrating the power of social networks, this resulted in companies such as Starbucks and American Airlines pledging to eliminate plastic straws.
Following the High School shooting in Parkland, Florida in early 2018 students directed social media campaigns at major companies linked to the National Rifle Association. The trending of #BoycottNRA on Twitter placed much pressure on companies to disassociate from the NRA. Those who cut ties included United Airlines, Hertz & Best Western.
More recently we have seen the #schoolstrike4climate movement driven by 16 year old Swedish schoolgirl Greta Thunberg. The Gen Z activist began skipping school on a Friday to protest about climate change outside Sweden’s parliament. With the economic clout of Gen Z behind her an appeal to global business leaders at the annual World Economic Forum in Davos followed. Here, for the third year in a row, the subject of environmental risks dominated the agenda.
Gone are the days of ethical investors being considered ‘tree-hugging hippies’ who place principles over performance. This shift in attitude points towards a bright future for investment approaches incorporating socially responsible concerns.
The Share Centre has some suggestions of funds which incorporate socially responsible investing in the heart of their process:
BMO are one of the leading players within the field of Socially Responsible Investing (SRI) as evidenced by their large Governance and Sustainable Investment team and the Independent Committee of Reference. In addition to their SRI-specific funds they actively engage with companies on SRI issues as a central part of their investment philosophy, which is known as their Responsible Engagement Overlay (REO). The fund aims to provide capital growth by investing in an actively managed portfolio of ethically screened, diversified global equities.
Launched in November 2018 this fund invests in companies that aim to have a positive societal impact through addressing the world’s major social and environmental challenges. The managers will seek companies that are Pioneers; those whose products or services have a transformational effect on society or the environment, Enablers; organisations that provide the tools for others to deliver positive social or environmental impact or Leaders; companies which spearhead and mainstream sustainability in their industries. This fund is suitable for those seeking a positive impact from their investments.
This investment grade fund targets high yield with a strong ethical overlay. Once investment themes have been developed, the team carry out credit analysis to find the assets that work best within the thematic framework. Cash flow and strong balance sheets are key in determining bond selection, The ‘Plus’ is conviction – that to achieve above average long-term performance, the team feel they must think differently to the market. After that, an ethical overlay is applied which consists of a negative screening followed by a positive screening. Input from Rathbones Greenbank makes good use of this specialist ethical resource within the group. This fund is suitable for SRI investors particularly seeking income over capital growth.
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