Investing money into a startup can be a tedious task, and a lot of research should be done before any money is sunk into a business. There has been an interesting shift in the startup world and many investors are now more concerned about ESG (environmental social and governance) than making a return.
Ethical investment started taking over in 2018, where it was seen as the investment of the future. And many studies have been conducted since then to show just how true this is. It has become mainstream to align your investment with your own morals.
Let’s break down what ethical investment means. When investors start doing research on the businesses that they wish to invest in, aside from their revenue, investors now start looking at the values of the business. Now they look at the business’ political view, environmental impact, carbon footprint, recycling policies, employee benefits, and even how focused they are on using renewable resources.
The global pandemic has accelerated the ethical investment movement, as many started to become aware of the impact that a business can have on the environment and how it can disrupt the future of the planet. Many companies were cancelled for not being environmentally conscious or if they forced their staff to work long hours during lockdown.
The investors are Millennials
According to a survey conducted by Pew Research Centre, younger Americans (Millennials and GenZ) are more aware of climate change and willing to speak about it. They are exposed to seeing information on the environmental impact that they have and are more likely to take action.
Millennials are those born between 1981 and 1996, meaning that they are now between the ages of 25-40. Because of the age group they fall into, they have entered the investment market. According to a survey done by Gallup in 2019 showed that 67% of people between the ages of 18-29 and 49% of those between the ages of 30-49 believe that global warming is man-made and a real threat to the future.
This means that when Millenials, and even a small amount of GenZ, are looking for investments they tend to support companies that are environmentally friendly and have a low carbon footprint. Based on an article done by DailyFX, Millennials are investing in tech companies and companies trying to make carbon emissions less.
Aside from the environmental impact that a business has, the political stance of a company is just as important to them. With the rise of the awareness and the support that Millennials express for the LGBTQ+ community, they deem ESG important when investing. According to an article published by CNBC, Millennials have been investing in ESG for quite some time and have spurred other generations on to do the same.
All of the hard work that Millennials have been putting into awareness for climate change is starting to pay off. They have convinced investors that ESG investment is more important than making a return on investment. Because, in the long run it will ensure a better future for the planet and supporting businesses with that same view will accelerate the process.
Internet culture accelerates awareness
Nowadays everyone has access to the internet and many social platforms like TikTok have gained a large following. These platforms are used differently by the generations, according to an article done by Sprout Social.
According to their findings, Millennials use social media to engage with brands. This means that Millennials are aware of the brand’s message, environmental impact and carbon footprint. Because of how tech savvy they are, they tend to do more research before investing their funds.
This can be good or bad for brands. Once a brand has been cancelled by the internet, investment and stocks are said to lower. The BBC did an article on how cancel culture is affecting people and corporations. It lists companies that have been victims of cancel culture, like Pepsi, Starbucks and Nike. The article also highlights the difficulties that this phenomenon can hold for a business or individual.
Because of the rapid rise of internet culture and how active Millennials are on their social platforms, it accelerates the awareness of ESG investment. The awareness created around investing and supporting the ‘right brand’ targets a large audience and causes more individuals to react.
ESG has become more important than ever, especially with the climate change awareness fueled by social media and Millennials. It has caused many to evaluate the morals of the businesses that they want to invest in and to make sure that it strives for a better future for the planet.
With all of the movement and awareness that has taken over the Internet, it is no wonder that ethical investment has become mainstream. Companies will have to ensure that their social posts and branding messages are up to par with what Millennials see as ‘acceptable’, and if not they will get cancelled.
With an already stiff competition for investment, it makes it harder for companies to ensure that their messages are ethically correct and in line with what society expects nowadays. Which poses the question, should all organisations aim to be ‘ethical’ in the eyes of the Millennials?