Sustainability-Related Indices Should Be Attuned to the Cohort Driving Growth in Sustainable Investing – Millennials

Abstract

This research explored to what extent sustainability-related indices are attuned to millennial investor’s interests. Current and projected growth in millennials’ wealth, increases in sustainably-invested assets, millennials’ interests in sustainable investing, ESG integration in the investment profession, and the United Nations’ implementation of sustainability initiatives are amongst several factors which indicate there’s a demand for sustainability-related indexed products for retail and institutional millennial investors. The basis for this research is product issuers can only develop and bring to market sustainability-related index-based products (e.g., Exchanged Traded Funds (ETFs), mutual funds, tracker funds, and derivatives) for the millennial cohort if index providers construct indices based on millennial investors’ interests. An evaluation form was designed based on millennial trends and preferences, which were organized as performance indicators across 4 categories (i.e., ESG, environment, controversy, and education), and implemented to measure to what extent the sample of sustainability-related indices are attuned to millennial investors’ interests. The sample consisted of 20 sustainability-related indices listed on different stock exchanges in 20 different countries and were identified through the United Nations Sustainable Stock Exchange Initiative website. Data was collected from publicly available online data to complete the evaluations for each index. Data and graphical analyses of evaluation scores explain and conclude the sample is not attuned to millennial investors’ interests. The research also concludes there’s no correlation between the evaluation score for each index and its respective 1 year annual return’s financial performance. Further research is suggested including adding additional millennial investor performance indicators and long-term financial performance factors (i.e., 5 year returns and older).