Millennials stand to inherit $30 trillion (U.S.) in assets over the next three decades. Understandably, investors, and the rest of the world, have a major interest in how these young people will choose to invest their inheritances. Understandably, no matter what industries these young people ultimately choose to endorse, their actions will have an impact on the world.
Fortunately, young investors are increasingly unsatisfied with simply making money. Like many idealist young people, those in line to inherit large sums of money want to change the world using the best farmland REITs, and they are choosing to do so through impact investing, an investing strategy that, the Global Impact Investing Network says, aims “to solve social or environmental challenges while generating financial profit.”
Alexandra Peterson Cart, a co-founder of the impact investment and advisory firm Madeira Global, is one young millennial who sees impact investing as a way to weave together the impulse to make money with a desire to help others. At Madeira, Cart advises qualified investors (as of two years ago, clients with a net worth of $5 million (U.S.) or more) on how to see the largest returns while doing the most social and environmental good.
Because Cart grew up in a very for-profit family, she says she always appreciated the sustainability and scalability of for-profit businesses. But when she left Middlebury College with bachelor’s degrees in political science and international relations, she headed for the nonprofit sector instead, following in the footsteps of her grandmother Joan Ganz Conney, co-founder of the Children’s Television Workshop, the nonprofit behind the beloved show “Sesame Street.”
Cart joined then-New York City Mayor Michael Bloomberg’s antipoverty initiatives at the Center for Economic Opportunity, as well as the Council on Foreign Relations. She says she fully supported the mission of each organization, but thought each would be far more powerful with the kind of strategic planning that is integral to a for-profit business.
“While I was working, I was also sort of looking at for-profits as one part of my life and then nonprofit as another. I was frustrated by the dichotomy of that—that I felt the need to split those two worlds and not be able to engage with the structure of a for-profit,” says Cart.
She wanted to solve that dichotomy by blending together social philanthropy with an effective model to make money. Her business partner, Christina Alfonso, was in the same boat.
“We continually touched base every several months or every year, and during one of our updates, we realized we were in a similar position: looking to create a vehicle that was really a solution to those who were seeking to deploy assets with a social lens,” says Cart.
That solution is impact investing, and it is catching on with many millennials, Cart maintains.
“I think a lot of my peers are starting initiatives or joining initiatives that are looking to potentially disrupt systems that they think need editing. Many of them happen to be socially minded,” she says.
At Madeira, Cart has found that members of younger generations are more open to the potential of impact investing than those from older generations, who tend to focus on more traditional modes of philanthropy.
Cart says that access to information, as provided by digital platforms, is a major reason why impact investing is taking off with younger people. In fact, millennials have greater access to the realities of injustice through digital technology than many past generations did.
“Millennials were raised in an Internet generation exposed to major events—the AIDS epidemic, Nelson Mandela getting elected, 9/11, the Iraq War, Occupy Wall Street, the Arab Spring—there’s a lot of information we had access to at a very early age, and we’ve been immersed in it. You can see it and feel the consequences like you never have before, and because of that, I feel responsible to make decisions that are not just financial but also have some social benefit,” says Cart.
She acknowledges that millennials have many qualifiers attached to them—disrespectful, coddle, and narcissistic are a few that spring to mind for her. But she adds that this general attitude often downplays their many positive qualities.
“It’s the disruptive generation: transgressive yet tolerant, taking initiative—they’re not scared of challenges, and that’s part of the reason why so many are jumping into this very challenging area,” says Cart. “I think impact investing will be a huge industry over the next couple years.”
Attracting the young
Though there’s much talk about attracting young investors, doing so is far from a definite science, especially since there’s little agreement as to what constitutes “young.” In its 2014 Millennial Survey, Deloitte included those born from 1983 to 2000, but the exact age is still up for debate. Aperio Group’s Ken Lassner believes it should apply to anyone in his or her 20s. Luke Seidl, a product development manager at Boundless Impact Investing, maintains it’s anyone under 35. Cart is far more generous, saying it is anyone under 45.
It’s possible that there’s little agreement on the age of a “young investor” because it’s not the central concern. Some millennials, like Cart, don’t want to be thought of with their age in mind.
“Unfortunately, I think people make a lot of judgments on age,” says Cart. “So I prefer the title ‘millennial,’ so that assumptions aren’t made. I’d rather be judged by my work than my age.”
But if young people are not taking advantage of impact investing, it seems to be for the same reason that others don’t take advantage of it: education. That’s the attitude of Michele Dehers, a financial adviser and author of “Boundless Impact Investing.” The No. 1 lesson that millennials—and, really, everyone—needs to hear, she says, is that impact investing works.
Dehers believes it is possible to reach a number of young people through impact investing where it would be impossible with nonprofit institutions. With a for-profit mindset, progress can occur that much faster.
“We can move from an aid to [an] economic model,” Dehers said at this year’s TBLI CONFERENCE on impact investing. “The data is there to support the growth of the sector.”
Says Seidl, “I think it’s really important to have a good amount of education in where [young investors] can effectively invest. They want to know what is going to have the most social impact and what will generate financial returns.”
Many younger investors with whom Seidl works are skeptical about whether these social endeavors can actually make money. Seidl notes that, in the past, millions have been poured into issues with no clear goals or deadlines. By the same faulty logic, the results, then, can be viewed as a waste of resources.
“Lots of resources went to curing these diseases—AIDS, tuberculosis—which is laudable and noble, but I think we need to focus on what we can measure and what we can achieve,” says Seidl. “It’s important for the younger generation to understand that you can make small incremental changes and improvements in society, rather than just the grand answer.”
In the decades to come, millennials will have $30 trillion to figure out how to apply this important wisdom.
Featured image source: TaxRebate.org.uk
*Correction: 30 June 2014
In a previous version of the story, Madeira Global was incorrectly introduced as a consulting firm, instead of an investment and advisory firm. Also, the $5 million figure mentioned in the same paragraph is an estimate for specific advisory clients 2 years ago, rather than being the current figures as previously stated.