The superannuation industry has a battle on its hands when it comes to engaging Millennials. Funds are continuously looking to find a connection and ways to encourage Millennials to choose and keep a fund, consolidate and make informed decisions within their super. So far there has been varied success across the financial services industry.
Many articles, reports and senior financial industry figures stereotype Millennials as being indifferent, financially lazy – as summed up by the “smashed avocado” saga. However, on the ground research conducted by MyLife MySuper, increasingly shows that Millennials care about their financial well-being but have awareness and drive to better their community and make a difference in the world. They require the tools to be able to make good financial decisions, but want an outcome that is bigger than themselves. This can be seen with the success of companies founded by Millennials, such as “Thankyou” and “Who Gives a Crap”, that sell consumer products with a portion of profits going to impact major global social and environmental issues. Does this create the link the super industry can use to engage Millennials through their desire to have a positive impact on global issues with an impact investment option?
It has been over a decade since a group of humanitarian investors introduced impact investing to the world. Impact investing can be defined by its aim to generate social and environmental benefits without sacrificing investment returns. Within Australia, impact investment options have already helped to fund many significant social and environmental programs. These range from investing in schools, in programs to improving the well-being of the homeless, to renewable energy. Super funds creating an impact investment option, such as Catholic Super, do so by investing in assets that display a clear and tangible positive environmental or social impact. The option includes carefully selected avenues for impact through private equity to other growth assets such as overseas shares and infrastructure.
The impact of impact investing
Looking at some of the figures from the “Australian Impact Investing Activity and Performance Report 2016”, we can see that:
- 60,000 vulnerable Australians have been given access to health, education and job training services
- 126 schools improved through new facilities, training and inclusion programs
- 319 jobs were created, including those typically marginalised from mainstream employment such as the long-term unemployed
- 1,072 people with disabilities have been supported through funding of disability support enterprises
- 11,501 MWh renewable energy generation created through investment in wind farms.
This list is by no means exhaustive but gives insight into the real impact that these options are increasingly having on improving social and environmental initiatives. It is through measuring this impact that there may be increased engagement of Millennials in investing, particularly those mandated SG contributions that Millennials will have their whole working life. Arguably, if a fund can measure Millennials’ positive impact on various social and environmental issues, a buy-in is created that resonates with the displayed values of the group.
Measuring the impact
If impact investment options do have the ability to engage Millennials, there must be a framework or some accountability to deliver results for members otherwise funds run the risk of muddying the waters with different metrics for results. Results in this instance are defined as both returns and impact.
We have already established that the impact option itself, to be attractive as an option, must not sacrifice returns in the search for impact. In similar fashion, funds must find a way to measure impact. Looking at a number of impact investment funds that publicly disclose how they measure impact, it can be seen that the majority employ more than one measurement framework. This appears to be the case as with the diverse range and number of social and environmental issues impact investments touch on, there is no single framework to measure the individual impact on each. This can make it extremely difficult to compare the impact of impact options.
With super already being seen as having complexities or barriers for engagement of Millennials, a simple, transparent, industry wide framework is a must for measuring impact. If this is done well, there is opportunity for increased engagement, for example a Millennial with a particular social issue close to them such as Global Warming, could invest in an option that specifically measures the positive impact on Global Warming initiatives. This is a critical measure as without impact, there is no impact investment.
The value of reporting
As impact investing grows among financial services—including super funds, investment managers and major investors—returns, impact and its infrastructure will become more mainstream and comparable to other more traditional investments. As Millennials move through their careers and look for that greater sense of purpose and ways to impact upon social and environmental issues that mean something to them, impact investment options present an easy way to do so. As these options are taken up and continue to become more mainstream, the reporting on the real impact these options have on important social and environmental issues will give that added sense of satisfaction to Millennials and potentially shift that engagement barrier super funds are currently working through.
This reporting will also create visibility which, along with successful proactive engagement campaigns by super funds, may create the push that Millennials are looking for – the value alignment with a fund that looks after their best interests and strives for a positive impact on our world.