Baby Boomers ESG fund trading activity soars 107%

The Share Centre sees increased interest from Baby Boomers looking at how to align investment objectives with core values

Research from the UK’s The Share Centre has found the ‘Baby Boomer’ generation has increased its focus on ESG funds as more individuals become interested in how best to align their investment objectives with their values

Young people, commonly categorised as millennials (a person reaching young adulthood in the early 21st century) and Generation Z (the generation reaching adulthood in the second decade of the 21st century) have more notably expressed an interest in investing ESG funds since responsible investing became more popular over the past five years.

The Share Centre said while this continues to be the case, analysis of trading activity throughout the coronavirus pandemic fall-out shows an increase of 107% in the number of trades in ESG funds by Baby Boomer investors.

Furthermore, investors over 75 have increased their ESG exposure with trades up 14% on the same period last year.

The research also found almost half of Generation Z (49%) and 47% of millennials would be happy to make slightly less profit if the company they invest in is more aligned with their values.

However, the older generation is also appearing to express an interest in educating themselves on investing in strategies that they find more meaningful in terms of their values.

Lucinda Gregory, investment research & guidance manager at The Share Centre, commented: “It’s becoming increasingly clear all generations want to reimagine the future of investing especially now there is an opportunity to create change in the aftermath of the pandemic. Record inflows into ESG funds certainly reflect this mind set.

“It would appear investor’s concerns of sacrificing performance for principles are misplaced as data from Morningstar shows sustainable funds incorporating strong ESG principles outperformed conventional funds in the first quarter of 2020. Many believed the coronavirus pandemic would halt the unprecedented momentum of responsible investing witnessed in 2019, the recent strong performance of funds incorporating ESG factors has proved the cynics wrong.”

The firm pointed to the Morningstar report Investors back ESG in the crisis, which showed investors across the globe piled $45.6bn into funds focused on ESG in the first quarter of the year when the spread of covid-19 caused countries to lockdown and markets plummeted. Indicating the level of interest in responsible investing, the ESG inflows compared with global outflows of $384.7bn for the overall fund universe.

In a conversation with ESG Clarity, Dan Kemp, CIO EMEA at Morningstar and editorial panellist for ESGC, said there is a ”growing realisation” in society that individuals own companies through their investments and therefore need to make sure they are aligned with their core beliefs.

“if people are maximising their recycling at home, will they happy to be investing in a company that is creating mass pollution?

“They are now seeking alignment in their investments. There is a growing realisation that their investments have a big impact.”

The Share Centre also added that the historical belief that aligning investments with their values means a sacrifice of returns is dissipating. Again highlighting the Morningstar report, the firm said recent data has shown these concerns to be misplaced with sustainable funds containing strong ESG principles outperforming conventional funds in Q1 of 2020.

Gregory added: “As more generations understand it doesn’t have to be a choice between performance and principles, ESG investing could reshape the investment landscape assisted by the biggest-ever generational transfer of wealth – from baby boomers to millennials. The recent pandemic will hopefully only fasten the pace of this revolution and enable us to ‘build, back, better’ creating both a more sustainable world and corporations alike.”

On that note, The Share Centre earmarked three funds for investors to consider to help the economy ‘build back better’ from the covid-19 crisis.

BMO Responsible Global Equity

“A leading player in responsible investing, BMO’s Responsible Global Equity fund seeks to invest in sustainable companies that are proactively managing their ESG opportunities and risks to make a positive impact on society and the environment.

“After two decades of running the strategy the managers have no doubt that global sustainability and financial performance go hand in hand. This is demonstrated by the fund’s first quartile performance over one, three, five and 10 year periods, outperforming both its benchmark the MSCI World and the IA Global sector.”

Baillie Gifford Positive Change

“This concentrated, global equity fund invests in companies which deliver positive social change in one of four areas: Social Inclusion and Education, Environment and Resource Needs, Healthcare and Quality of Life and Base of the Pyramid – addressing the needs of the world’s poorest populations.

“Investors should be aware this fund has a higher volatility than its peers; however it has delivered outstanding risk-adjusted returns for investors since launch in 2017 posting first quartile returns and outperforming the IA Global sector by a considerable margin.”

VT Gravis Clean Energy

“Coal and oil still account for over 60% of total global energy supply and are both finite resources; therefore there is a large and growing market for companies involved in making energy generation and supply cleaner and more efficient.

“The team at Gravis has considerable experience in this area and invest in renewable energy such as wind, solar and hydro via companies owning renewable energy assets or operations directly linked to the funding, construction, generation and supply of renewable energy. The fund also invests in greener energy – companies that derive a significant part of its revenue from increasing the efficiency of or reducing pollution from generating and supplying energy or using energy.

“The fund aims to deliver a regular income of 4.5% per annum as well as preserving investor’s capital with the potential for growth.”


Natalie Kenway

Natalie is editor in chief at MA Financial covering ESG Clarity, Portfolio Adviser and International Adviser. She was previously global head of ESG insight for ESG Clarity and has been an investment journalist...