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Adviser Reflection - ‘Clients have eyes wide open on these topics’

“My clients, like most people, have experience in being a ‘global citizen’. And they realize they don’t want to contribute to things like water scarcity, because they’ve travelled overseas and they don’t want to contribute to plastics in the oceans, because they’ve swum in beaches in Bali, that have been full of plastic. When you think about it from a real-life perspective, clients actually have eyes wide open on these topics. And they’re just struggling with how they connect what they see as problems for the planet with their money.” Karen McLeod.

Demographic shifts

High-level demographic analysis suggests that interest levels in ESG investing are higher amongst younger investors, females, and high net worth individuals.

But perhaps the most interesting and powerful demographic trend influencing the way we invest is the intergenerational wealth transfer which in Australia will see more than $3 trillion change hands over the next 20 years14.

Many of the beneficiaries of this transfer will be the Millennials – the eldest of which have already turned 40. Better educated and more environmentally conscious than their forebears, this generation understands better than most the need to improve the world our children are growing up in. And, according to one observer, ‘ESG investing will explode in the next decade with the incoming wealth being transferred from Baby Boomers to Millennials’15.

On the other side are those who will hand the wealth down, the Baby Boomers, who, having benefited from affordable real estate and more stable, predictable working lives, have accumulated enough wealth to be more than just comfortable. This generation has realised that the way they invest now will influence not only the wealth they transfer, but the world they leave behind. For them, ESG investing, with its capacity to outperform and create a more positive legacy, will be increasingly appealing.

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References

14

Three trillion reasons Millennials are set to drive the clean money revolution, theguardian.com, March 2021.

15

ESG spike with largest intergenerational wealth transfer: deVere, Sarah Simpkins, investordaily.com.au, January 2020.

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