Insights for Non-Profits

Over the past several years, the investing marketplace has shown a growing interest in socially responsible investing, or SRI. In a previous post, we outlined how SRI strategies are well suited to non-profit portfolios, given their dual focus on investment returns and social benefit, along with three examples of SRI strategies used by investors.

SRI is not a new concept by any stretch, but it has gradually gained more traction. Why? The most important factor, in our view, has been demographics; specifically the ongoing development of the millennial generation into socially aware and increasingly wealthy investors.

Millennials, born from about 1981 to 1997, make up about 27% of the global population. Due to this generation’s size, they’ve become the dominant cohort driving everything from pop songs to hiring practices. But until recently, investing has been a bit of an afterthought. As large as this generation is, they only controlled about 4% of total household net wealth as of 2015. This is gradually changing as the millennial generation is expected to experience the fastest growth rate of net wealth going forward.

SRI seems to be an early indication of millennials’ market power. 66% of millennials say they want their investments to reflect their social and environmental values. Research from the Responsible Investment Association found that millennial investors are 65% more likely than baby boomers to consider ESG factors when making investment decisions.

What does this mean for non-profit investors? Millennials, more than any other generation, want to support organizations that mirror their values. Socially responsible investing is a way to demonstrate your organization’s values to potential donors and volunteers. Whether they invest their time or their dollars, this generation can be a natural partner for your organization if you are able to demonstrate the ways you actively support your mission.

The first step is to determine if SRI is a good fit for your organization, understand the different options that are available, then choose an approach that best balances your philanthropic and financial goals. From there, publicize how your investments support your philanthropic mission. Consider including this information in your annual report and promoting the ways you invest responsibly on social media. Finally, it remains important to continue to implement ways to attract millennials and gaining them as volunteers, public advocates, associate board members, and donors.

SRI is but one tool to help organizations connect with a generation that will only become more socially and financially influential over time. By taking advantage of this trend now, organizations can start to build long-term relationships with people that share similar values.