From Spear's Magazine:
David Dawkins speaks to Barclays and UBS on millennials, impact and sustainable investing as the wealth management world prepares for the next generationI am a sustainable investing sceptic.
For a while now I’ve been perplexed: stuck. Why would you ever compromise the simple relationship between client, wealth, wealth manager and returns with the slightly vague and morally superior idea of ‘sustainability’?
Is it really in the best interests of the client you represent to introduce the idea that an investment has a value over and above (or even alongside) the return?
And what about millennials, the very people this new investing culture has rushed out to greet?
Lazy, entitled? ‘LOL’. ‘Hard to reach’ - WTF?
I’m just not convinced that the fundamentals of wealth management need to change or adapt to a generation that, in all likelihood, will end up becoming a lot more like their parents than we currently give them credit.
Take the 11 richest millennials in the US - eight are self-made (Facebook, Airbnb, SnapChat and Outcome Health) only three have inherited their wealth (Anheuser-Busch InBev, Enterprise Products Partners and Walmart). Lazy? A lot of what’s said about millennials pangs of a sloppy consensus. Can we really rely on one set of rules for the entire next generation of wealth around the world?
Take this current #fallingstarschallenge craze ‘sweeping’ (at least according to BBC, the Guardian et al) China, Russia and the US. Young, rich Chinese millennials pretending to fall out of their Lamborghinis or private jets, then photographed having spilt their gaudy trinkets - watches, handbags, champagne flutes - around them on the floor. In short, how can wealth managers possibly prepare a service based on a single set of values for a generation known for the shape-shifting nature of their of their beliefs and behaviour?
The answer is sustainable investing. Investing to the values you hold - best understood as a good strategy for dealing with first world guilt, aimed at the increasing number of people out there who are both socially conscious, and rich enough to be so.Recently:
Described by the National Review as ‘Boomer liberalism’ the ‘strategy’ they claim is one ‘easily pitched’ if ‘returns stay the same’, but investors avoid - ‘inadvertently financing companies that do evil things.’
And the journey away from ‘evil things’ takes three distinct paths. Firstly avoiding investments that are (probably) not aligned with personal values - weapons manufacturing, porn, tobacco (the Church of England has done this for years). And secondly what’s described as ESG investing - looking at a companies’ performance in terms of environmental, social, and governance.
For example, as Helen McDonald - Director, UBS Wealth Management charities team UBS tells Spear’s, firms with positive values on the gender pay gap and C-level diversification will deliver better risk-adjusted returns as ‘more diverse thinking tends to lead to better decision making and better corporate performance’.
As such, there is now such a thing as a Gender ETF.
‘Impact investing’ is the third strand, where you are generally aiming to make a return - albeit a sub-market return but with a very explicit social and environmental impact....MUCH MORE
Oct. 25
Some Thoughts on Environmental, Social & Governance Investing (ESG)
