We have seen many studies that suggest the attitudes of younger generations will generate a substantial rewriting of both the political and investment landscape in the years to come. Morgan Stanley's "Sustainable Signal" study, published in August, shows a strong appetite for, and optimism about, the effects of sustainable investments from the majority of millennials, typically defined as those born 1982 to 1995.
Pension funds are responding in force. The California Public Employees' Retirement System's five-year environmental, social and governance strategic plan was adopted in August 2016. The New York State Common Retirement Fund enhanced the ESG component of its manager selection earlier this year.
The investment offerings are emerging, but even liberal minded millennials show some of the age-old reservations about the possible impact of ESG considerations on performance. We believe an active ESG focus from institutional investors — directed at companies that have work to do in this arena — is necessary to help millennials overcome qualms and fuel future demand for ESG-conscious investment strategies. That focus also should reward those active investors with stronger long-term returns. There can be a virtuous circle for ESG-minded investors.