Investing in the Impact Generation

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Investing in the Impact Generation - Part #1

The following is an excerpt from the book titled “Investing in the Impact Generation,” written by Bill Davis, CEO of Stance Capital. This is the first installment of a six-part series.

Attaching labels to generations is somewhat new, relatively informal, and has no real science behind it. Nonetheless it is fascinating, and makes a great deal of sense when you consider that people who come of age (teen through young adult) at specific times in history are shaped by the physical, social, economic, and political environments around them. Tom Brokaw coined the term The Greatest Generation to assign a label to the cohort of Americans that grew up in the Great Depression, fought in World War II, and went on to make America a dominant economic power. And in his book by the same name, he went on to characterize this generation’s greatness as a selfless conviction that fighting in World War II was simply “the right thing to do”.

Since then we’ve had Baby Boomers, Gen Xers (sometimes known as the Latchkey or MTV Generation), Gen Yers (Millennials) and Gen Zers, some of whom are still in high school. Each of these groups has defining characteristics, and of course these characteristics are inextricably shaped by what has come before them. Baby Boomers have been defined as competitive, self-assured, and goal oriented. And why wouldn’t they be? They inherited an expanding economy and global authority.

Their Gen X and Millennial children, on the other hand, inherited dramatic and growing wealth inequality, environmental degradation, mountains of student debt, and the Great Recession. Perhaps nowhere is the generational linkage better defined than with Gen Z. In a nation with seven million assault weapons in the hands of literally everyone who wants one, is it any wonder that this generation may well be defined by the #neveragain movement considering the fear of senseless gun violence that faces these kids every day?

While it might be tough to top the “greatest” generation, I believe Millennials will do just that. Historians will know Millennials as “The Impact Generation”, and this chapter will demonstrate why this is their destiny. Their future will be driven by a combination of their unique values and worldview, unparalleled access to information and the tools to use it, sheer size (nearly 80 million members), and an estimated $24 trillion of accessible wealth by 2024.1

The Impact Generation Defined

There is a lot to unpack here so let’s start with the term “impact”. In a broad sense this means doing something that creates a positive outcome. As it relates to investing, things get a bit more complicated because “impact investing” is a defined term, but without a precise meaning.

The terms Socially Responsible Investing (SRI), Environmental, Social, Governance Investing (ESG) and Values-based Investing are often used interchangeably within the broader category of Impact Investing, and represent a wide array of underlying value propositions and investment strategies. In order to avoid confusion between these approaches, we will default to the following definitions outlined by Commonfund Institute:2

  • SRI - a process that seeks to avoid investing in certain companies or industries through negative screening according to defined ethical guidelines;
  • Impact Investing – direct investments in specific companies, and even place-based projects, with the desired goal of effecting mission-related social or environmental change;
  • ESG integrating environmental, social, and governance factors with fundamental investment analysis to the extent they are material to investment performance in order to generate competitive returns.

Values-based investing is a newer concept and refers to an extension of ESG toward other values sets. These could include investing with a gender lens, or a focus on human rights, or faith, or something else entirely. It’s easy to see why the terms are confusing as the intent of all approaches is to align capital with values, and this might manifest itself as micro-loans to create jobs in Ethiopia (or Peoria) or tweaking a retirement account to make sure public equity holdings don’t include weapons and tobacco companies. For the purposes of this chapter, when we refer to Millennials creating impact, we are really talking about all of the above, in both private and public investing.

Taking this a step further, Millennials will be the Impact Generation not just through their investments but also through their careers and as an expression of their personal brands. Fueled by technology and access to everything, this is the first generation that will favor experiences over material belongings, and will pursue social justice at least as vigorously as pursuit of profit.

I am reminded of an old expression that goes like this: “if you’re not a liberal at twenty you have no heart; if you’re not a conservative at forty you have no brain.” The point is that every generation of young people is full of dreams of making the world a better place. In this sense today is no different than the 1960’s or any other time of coming of age.

Except that Millennials’ desire to make the world a better place today is less a youthful hope and more a stark necessity. Taken alone, the physical, social, economic, and political challenges that surround Millennials are formidable. Taken together, there’s really no alternative but to tackle the challenges head-on.

1“Millennials – the Global Guardians of Capital”. www.ubs.com, 22 June 2017

2 “Caplan, Lauren, et al. “From SRI to ESG: The Changing World of Responsible Investing.”Commonfund Institute, 1 Sept. 2013, pp. 1–1.”

Click here to read the second installment of this series.

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Jun 17, 2020