Young investors with lockdown savings are looking to use their money to create positive social and environmental change as well as long-term financial security, a new study shows.
The report by ethical bank Triodos found that while many younger people have faced unemployment, reduced working hours or a difficult financial situation over the past year, two fifths (42 per cent) have found themselves with more money to spare from not spending as much.
For young people on both sides of this coin, investments are becoming an increasingly attractive way to help build a better financial future. Four in ten 18-34 year olds (40 per cent) polled said that their interest in ISAs (individual savings accounts) and investing has increased during the last 12 months. The most common reason for this, according to the report, is that the pandemic has made them more aware of the need to have a secure long-term financial future.
..there has been a real step change in awareness of the links between personal finances and the wider world.
One in five 18-34 year olds (18 per cent) – equating to over 2.6 million people* – said they are looking to open a new or additional ISA this year, while one in 10 (9 per cent) intend to move more money into an existing ISA.
Investment more popular than cash
These new investments are most commonly going into investment, rather than cash ISAs. More than half (51 per cent) are planning to open a Stocks and Shares ISA, and 25 per cent are considering an Innovative Finance ISA that offers crowdfunded investments.
Gareth Griffiths, head of retail banking at Triodos, said:“When such a large proportion of young people are interested in an impact investment ISA that matches their values, it suggests that there has been a real step change in awareness of the links between personal finances and the wider world. We want to encourage people to think about what their ISA pot is doing, just as they would consider the ethics of what company to work for or what politician to vote for.”
Triodos, a Good With Money ‘Good Egg’ firm, found that younger investors are far more likely to choose investments and providers that align with their values, with 94 per cent of ISA holders age 18-34 saying they already have, or would consider switching their money to an ethical provider. This compares to 71 per cent of over 35s. It means that as the next generation of investors comes to choose their ISA products, there could be a significant boost in ethical and sustainable investments.
Need for transparency
The study also reveals that seven in 10 UK consumers (71 per cent) think banks and financial providers need to be more transparent about how they invest their customers’ money, while two thirds (64 per cent) say the Government needs to do more to make banks be transparent.
Meanwhile, half of UK adults (50 per cent) think that banks and financial providers purposefully hide the sectors they invest in from their customers.
Consumers are also calling for increased transparency when it comes to avoiding greenwashing, with 64 per cent saying there needs to be industry-wide standardisation in the definition of ‘sustainable’ or ‘ethical’ funds.
Kia Commodore, personal finance expert and founder of financial literacy platform Pennies to Pounds, said: “Young people are sparking a movement towards sustainable investments that will make ripples throughout the investment industry. We are seeing the rise of empowered investors, who want to know much more about where their money is going and what it is funding.
“They are taking control and making decisions to invest in companies that best align with their personal values. Investment providers who fail to join this movement may lose the backing of this new generation of investors in the long term.”
Find out how to make your money match your values in our Good Guide to Impact Investing.
Capital in any investment product is at risk. The value of an investment may go down as well as up and investors could lose some or all of their money.