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Why ESG rating matters to millennial investors

Written by Eric Ebbert CFP®, MBA

On February 16, 2021

It seems like yesterday that millennials were teenagers and college students, but by now, the youngest millennials are age 24 while the eldest are 39. This is a broad group of adults who make up a large portion of the U.S. population. When it comes to investing, where they choose to put their money is going to have an impact on the market. As of data from 2020, it is becoming increasingly clear that ESG rating matters.

What is ESG?

ESG is short for environmental, social and governance. It is a system of standards that measures a company’s performance in the environmental, social and governance sectors. For example, a company that is environmentally friendly, is socially equal, and treats its employees and customers well will receive a high ESG score, such as Nvidia for its strict stance refusing to use conflict minerals in its graphics cards and its excellent employee training.

We can measure the impact by looking at the investor response. On October 13, 2020, Investors Business Daily reported that Nvidia was ranked as the highest-scoring ESG company. On October 22, its shares jumped up in value by 127%. Of course, other factors may correlate, such as a growing interest in PC gaming, but it is hard to ignore the increase of interest generated after the ESG report.

Why does ESG rating matter to millennial investors?

A recent study at the Sustainability Management School revealed that 87% of millennials believe that companies should address social and environmental issues. Given that environmental and social issues matter to a majority of millennials, it would behoove companies to adopt policies and take actions that improve their ESG score to attract new investors.

If you are a millennial investor looking for companies with high ESG scores, you can find information published by third-party organizations that rate a company’s ESG performance. Some resources you can use include:

Talk to a ProVise CFP® professional about ESG investing

Are the environment, social equality and company ethics important to you? When it comes to investing and growing your wealth, you can choose to direct your funds toward companies with high ESG scores and exchange-traded funds (ETF) that only trade in high ESG scoring companies. However, making an actual strategy and getting the most out of your investment can be difficult when you do not know how to navigate the market. Fortunately, there are professionals who can work with you.

At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.

Are you ready to talk to a professional about ESG investing? Contact ProVise today to schedule a complimentary consultation.

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