Millennials and Markets, Part I: Introduction and Sustainability
June 9, 2020
2020 has been unlike anything our country has seen in a generation. Between a global pandemic and unprecedented economic uncertainty, this year has been a dismaying and disillusioning time for our younger generations, who are now tasked with building a life and achieving financial stability amidst great insecurity.
Despite these difficulties, young people are still choosing to invest their money – and their faith – in the market. But some of the ways they’ve chosen to do so, undoubtedly informed by their experiences, have been markedly different from those exhibited by generations past. For younger investors, it’s no longer just about the monetary return. Young people today see investment as a tool to induce societal change.
Gordon Gekko’s famous "greed is good" doctrine is out, replaced by an investment mantra that privileges social impact over raw returns.
In this series of three articles, I look at ways young people, who came up amid the economic uncertainty of two major recessions and a global war on terror, choose to invest their money, and what these changes mean for the venture capital industry.
For the last few years, we’ve seen report after report about millennials’ reluctance to jump into the market, with many young Americans opting to hide their extra cash in the sofa and savings accounts. Yet, others have been holding out for the right moment, citing an overvalued market and an eagerness to "buy low." Well, for those who have been holding out, their time came this March as the stock market crashed nearly 30 percent due to the worsening reality of the coronavirus pandemic. As fearless millennials began to flood the market with investments, we were finally able to get some insight into their investing habits—what they value, and just as interestingly, what they don’t.
As CEO of Spectrum Business Ventures, I saw that, as the market bottomed out, there was an opportunity to place new strategic ventures at a time when others saw fiscal collapse. And, to my surprise, many millennials did too. But unlike generations past, millennials don’t choose their investments based purely on ROI; the invest in the firms and ventures that will help shape the world in accordance with their social and political preferences. In this first article, we look at one of the primary ways that millennials have “put their money where their mouth is” and made social statements with their wallets during this volatile period: sustainability.
Young people value sustainability to such a degree that green living has become an indelible component of the millennial experience.
As I’ve noted before, following emerging trends is one of the most important things an investor can do when searching for the next big company. It’s no surprise that some of the biggest winners over the last year have been millennial favorites like Tesla and Beyond Meat. Their financial success is a prime indicator that market sentiment is swaying toward sustainable, eco-friendly products and services. And millennials are leading that surge: SoFi Invest (a millennial-specific financial firm) noted that Tesla has been the most purchased stock on its platform for significant periods at a time.
On the flip side, we also witnessed the price of crude oil take a severe dive as falling demand and oversupply hit the once-dominant energy commodity (remember when crude was trading at -$37 a barrel?). In my opinion, this didn’t just come about because a slowdown in global activity—this was a culmination of investors’ fears of changing spending habits among the next generation. Millennials are rightly asking themselves why it’s necessary to fund ecologically harmful fuels when sustainable alternatives are viable and increasingly available. This is exactly why sustainable funds have outperformed their less sustainable peers during the pandemic.