Benevolent by nature, Kartik is a serial entrepreneur and a pro skydiver. He lives life king-size. Founder & MD of smartt-ai.com.
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Forget knock-down, drag-out stock market battles. Millennials are throwing a different kind of punch in the financial ring: the impact investing uppercut.
As Joel Solomon says: "We need to start to talk about money in ways that dethrone it and make it subject to human ethics and standards of love and decency."
Past making money, it's about making a positive difference while your money grows. I see this shift in priorities as something beyond a fleeting trend and as a direct response to the world millennials inherited.
Climate Change Anxiety Meets Investment Apps
Remember the Great Recession? Millennials do. They were just entering their formative years when the global financial system imploded, leaving a deep scar of economic insecurity. This wasn't some distant news story; it directly impacted their families, education and overall sense of stability.
They also came of age witnessing the devastating effects of climate change. From rising sea levels to extreme weather events, the consequences were undeniable and played out on their social media feeds daily. I see this one-two punch of economic instability and environmental anxiety leaving them hungry for a financial system that reflects their values—a system that tackles global issues and doesn't just line the pockets of the wealthy few.
Enter impact investing. It's like the cool older cousin of traditional investing. Instead of just chasing profits with a laser focus, it focuses on companies that are making a positive social and environmental impact alongside financial returns. Think clean energy companies battling climate change by developing innovative solar panel technology or wind turbine designs. Imagine sustainable clothing brands promoting ethical labor practices and fair wages throughout their supply chains. Picture healthcare startups improving access to medicine and basic medical care in underserved communities. These are just a few examples of the types of companies that attract impact investors.
Beyond A Fad: Millennials As A Financial Force
Here's the real kicker: Millennials aren't just a blip on the financial radar. They're the largest generation of investors ever, with an estimated $90 trillion in projected inheritance coming their way. This financial clout is only growing as they enter their prime earning years. This means their demand for impact investing is forcing the entire financial system to take notice. I see traditional investment firms scrambling to create impact-focused funds and products to meet this growing demand.
Imagine a world where your retirement fund isn't just funding some faceless corporation that's churning out who-knows-what products. Instead, it's helping build wind farms in your state or providing educational opportunities for girls in developing countries. Imagine knowing that your investment dollars are not only growing your nest egg but also contributing to a more just and sustainable world. That's the power of impact investing.
But Does It Make Money? Dispelling The Myth Of Sacrifice
One of the biggest concerns for investors, especially those new to the game, is whether they can achieve competitive financial returns with impact investing. The good news? Studies are increasingly showing that impact investments can perform just as well as, if not better than, traditional ones. For example, a 2020 report by the Global Impact Investing Network (GIIN) found that "70% of investors find the financial attractiveness of impact investing relative to other investment strategies at least somewhat important." This suggests that impact investing is not solely driven by altruistic motives but also by the potential for financial gains.
In fact, I believe that companies that prioritize social and environmental responsibility can be better positioned for long-term growth. By following these practices, you can attract and retain top talent who share your values, build brand loyalty with conscious consumers and become less susceptible to environmental regulations that could disrupt your business models.
Tech-Savvy Millennials To The Rescue: Democratizing Impact Investing
Remember all those financial apps millennials are glued to? Those very apps are making impact investing easier than ever. Gone are the days of needing a hefty minimum investment or a dedicated financial advisor to make a difference. Now, anyone with a smartphone can research and invest in companies that align with their values, all with a few taps.
Several investment platforms now offer user-friendly interfaces that allow customers to filter and select companies based on specific social and environmental impact areas you care about, such as clean water access, renewable energy or racial justice. This ease of access is critical for millennials who are comfortable with technology and are more likely to conduct their financial activities online.
Impact Investing Takes Center Stage
Impact investing is still a young field, but its growth is undeniable. With millennials leading the charge, I believe it's poised to reshape the financial landscape. This isn't just about making money; it's about building a more sustainable and equitable future for everyone.
With a surge in impact investing opportunities, traditional financial institutions will need to adapt and innovate to meet this demand. I think the most important factor in supporting this shift involves new tech platforms and testing out ways to democratize access.
Recognizing and preparing for this shift means understanding that the future of finance is intertwined with sustainability and social responsibility. By embracing impact investing, you can not only meet the demands of a new generation of investors but also contribute to building a more equitable and environmentally conscious future.
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