How millennials will grow Australia’s impact investing market

Let’s start with some questions…

What is the role of big business? Should companies focus mainly on growing their business and maximising profits?

Or does big business have a responsibility to assist with solutions to the problems society is facing, including providing capital for infrastructure, social and environmental initiatives?

These questions lie at the core of impact investing. Government and business around the world will be asked these questions more in coming years, as the gap between rich and poor continues to widen, putting increasing pressure on the public purse.

What is impact investing?

For those who don’t yet know much about impact investing, it’s essentially an investment that (when done successfully) operates on a win-win basis.

“Impact investments are investments made into companies, organisations, and funds with the intention to generate social and environmental impact alongside a financial return,” says the Global Impact Investing Network.

Old-school thinking won’t last

Many Australians were (and may still be) of the belief that it is purely the responsibility of Government (and perhaps philanthropists) to fund social and environmental initiatives.

But this notion is changing, with the rise of young, millennial investors.

Not only are they more globally connected and aware of global social issues thanks to social media, they’re demanding to know how their investments are being spent.

And we better sit back and take note - because “millennials have recently become the largest demographic cohort (now 29% of the population),” according to Colonial First State’s Global Asset Management research.

“By 2030 they will represent the largest source of income and consumer spending, earning two out of every three dollars in Australia.”

Social, environmental and capital benefits

While that old-school notion of investing purely for capital profit is enticing, 87% of millennials believe business success should be measured by more than just financial performance. 

And importantly, they're putting their money where their mouths are.

Colonial First State’s Global Asset Management research found funds that invested in 'core responsible' investment strategies doubled between 2013 to 2015, to $51.5billion.

In Australia, it’s estimated the impacting investing sector will be worth $33 billion within just five years.

But switching to impact investing involves plenty of challenges.

They’re risky, the “impact” can be difficult to measure, and the market is relatively young.

To learn more about impact investing, its potential and its challenges, watch our interview with FSC Global Markets and Investments Policy Manager Sara Dix here: