Investing in the Impact Generation (Part 1 of 3)
The following is an excerpt from a chapter titled “Investing in the Impact Generation,” written by Bill Davis, CEO of Stance Capital. This is the first installment of a three-part series.
Attaching labels to generations is a somewhat new, relatively informal practice that has no real science behind it. Nonetheless, it’s fascinating that people who come of age at specific times in history are all similarly influenced and molded by the physical, social, economic, and political environments around them. Tom Brokaw coined the term “The Greatest Generation” to label the cohort of Americans who grew up during the Great Depression, fought in World War II, and went on to make America a dominant economic power. And in his book by the same name, he went on to characterize this generation’s greatness as a selfless conviction that fighting in World War II was simply “the right thing to do”. 
Since then, we’ve had Baby Boomers, Gen X-ers (sometimes known as the Latchkey or MTV Generation), Gen Y-ers (Millennials) and Gen Z-ers, some of whom are still in high school. Each of these groups has defining characteristics, and of course these characteristics are inextricably shaped by what has come before them. Baby Boomers have been defined as competitive, self-assured, and goal oriented. And why wouldn’t they be? They inherited an expanding economy and global authority.
Their Gen X and Millennial children, on the other hand, inherited dramatic and growing wealth inequality, environmental degradation, mountains of student debt, and the Great Recession. Perhaps nowhere is the generational linkage better defined than with Gen Z. In a nation with seven million assault weapons in the hands of literally everyone who wants one, is it any wonder that this generation may well be defined by the #NeverAgain movement considering the fear of senseless gun violence that faces these kids every day?
While it might be tough to top the “greatest” generation, I believe Millennials will do just that. Historians will know Millennials as “The Impact Generation”, and this chapter will demonstrate why this is their destiny. Their future will be driven by a combination of their unique values and worldview, unparalleled access to information and the tools to use it, sheer size (nearly 80 million members), and an estimated $24 trillion of accessible wealth by 2024. 
The Impact Generation Defined
There is a lot to unpack here so let’s start with the term “impact”. In a broad sense this means doing something that creates a positive outcome. As it relates to investing, things get a bit more complicated because “impact investing” is a defined term, but without a precise meaning.
But to offer some clarity, we’ll go by the definition provided by Commonfund Institute. Impact investments are direct investments in specific companies, and even place-based projects, with the desired goal of effecting mission-related social or environmental change. 
The terms Socially Responsible Investing (SRI), Environmental, Social, Governance Investing (ESG) and Values-based Investing are often used interchangeably within the broader category of Impact Investing, and represent a wide array of underlying value propositions and investment strategies. To avoid confusion between these approaches, we will default to the following definitions outlined by Commonfund Institute:
SRI - a process that seeks to avoid investing in certain companies or industries through negative screening according to defined ethical guidelines
ESG – integrating environmental, social, and governance factors with fundamental investment analysis to the extent they are material to investment performance in order to generate competitive returns
Values-based investing – a newer concept that refers to an extension of ESG toward other values sets. These could include investing with a gender lens, or a focus on human rights, or faith, or something else entirely.
It’s easy to see why the terms are confusing. as the intent of all approaches is the same: to align capital with values. This might manifest as extending micro-loans to create jobs in Ethiopia (or Peoria) or tweaking a retirement account to make sure public equity holdings don’t include weapons and tobacco companies. For the purposes of this chapter, when we refer to Millennials creating impact, we are really talking about all of the above, in both private and public investing.
Taking this a step further, Millennials will be the Impact Generation not just through their investments, but also through their careers and as an expression of their personal brands. Fueled by technology and access to everything, this is the first generation that will favor experiences over material belongings, and will pursue social justice at least as vigorously as it pursues profit.
I am reminded of an old expression that goes like this: “if you're not a liberal at twenty you have no heart; if you're not a conservative at forty you have no brain.” The point is that every generation of young people is full of dreams of making the world a better place. In this sense today is no different than the 1960’s or any other time of coming of age.
Except that Millennials’ desire to make the world a better place today is less a youthful hope and more a stark necessity. Taken alone, the physical, social, economic, and political challenges that surround Millennials are formidable. Taken together, there’s really no alternative but to tackle the challenges head-on.
The Need for Environmental, Social, and Economic Improvements
Let’s start with the environment. While previous generations wrestled with pollution, that’s a low-level version of what the world faces today. Millennials have inherited the problems associated with climate risk, and there are many of them: coastal flooding, more violent storms, record-breaking heat each year, wild fires, drought, famine, lack of water, global dislocation, geo-political wars, disease, pandemics, and other such climate-related tragedies.
That alone might be enough, but let’s consider societal challenges. Notwithstanding a strong economy, one in every six Americans is food insecure, and most are living paycheck to paycheck, while the income gap between the wealthiest and poorest Americans continues to widen. As inequality.org points out, “The rich don’t just have more wealth than everyone else. The bulk of their wealth comes from different — and more lucrative — asset sources. America’s top 1 percent, for instance, holds nearly half the national wealth invested in stocks and mutual funds. Most of the wealth of Americans in the bottom 90 percent comes from their principal residences, the asset category that took the biggest hit during the Great Recession. These Americans also hold almost three-quarters of America’s debt.” 
Speaking of debt, according to Jack Friedman at Forbes, in 2017, student debt in the U.S. crossed the $1.3 trillion mark, making it the second highest consumer debt category, behind only mortgage debt. Graduates in their twenties now spend, on average, $350 per month paying down student debt; and as Sarah Landrum, writer and founder of Punched Clocks, points out in Forbes, “There are many kinds of freedom, but very few of them are possible to achieve without financial dignity.”  
The flip side of student debt is an educated workforce. Millennials represent the best-educated generation in U.S. history, but with 80 million members, and a changing nature of jobs in America, unemployment and under-employment combined with heavy debt burden create significant financial challenges for this cohort.
According to Pew Research Center, Millennials are “the first in modern era to have higher levels of student loan debt, poverty, and unemployment, and lower levels of wealth and personal income than any other generation at the same stage of life.” 
Beyond economics, Millennials are both racially and ethnically diverse, and are concerned about a wide variety of social justice areas including racial discrimination, women’s health and reproductive issues, healthcare in general, and immigration. This perhaps explains a decidedly more liberal outlook than previous generations. In The Generation Gap in American Politics, Pew Research Center looks at political preferences of various generations through the lens of first year job approval ratings of U.S. presidents. Unsurprisingly, the single biggest approval gap belongs to Millennials. Obama had a 64% approval rating after one year in office. Trump is at 27% approval after his first year. In contrast, Boomers were at 50% for Obama and 44% for Trump. 
Hopefully the picture is becoming clearer. Millennials have a lot of challenges facing them, and even without much money (yet!), they are making their intentions known. Given the dysfunctional political climate in the United States, (and remember, it has been this way for over seventeen years, so basically it’s the only political environment Millennials have ever known) young Americans have increasingly turned to corporations to drive the social changes they expect.
Let’s examine their relationship with corporations, as this informs their approach to brand preferences, career decisions and impact investing.
 Brokaw, Tom. The Greatest Generation. New York: Random House. 1998.
 “Millennials - the Global Guardians of Capital.” UBS, 22 June 2017, https://www.ubs.com/global/en/wealth-management/chief-investment-office/our-research/discover-more/2017/millennials.html.
 Caplan, Lauren, et al. “From SRI to ESG: The Changing World of Responsible Investing.”Commonfund Institute, 1 Sept. 2013, pp. 1–1.
 “Wealth Inequality in the United States.” Inequality.org, 29 May 2018, https://inequality.org/facts/wealth-inequality/.
 Friedman, Zack. “Student Loan Debt in 2017: A $1.3 Trillion Crisis.” Forbes, Forbes Magazine, 21 February 2017, https://www.forbes.com/sites/zackfriedman/2017/02/21/student-loan-debt-statistics-2017/#f673dd15daba.
 Landrum, Sarah. “Millennials, Technology and The Challenge of Financial Literacy.” Forbes, Forbes Magazine, 7 Aug. 2017, https://www.forbes.com/sites/sarahlandrum/2017/08/04/millennials-technology-and-the-challenge-of-financial-literacy/#4b8acc6128e6.
 Drake, Bruce. “6 New Findings about Millennials.” Pew Research Center, Pew Research Center, 7 Mar. 2014, https://www.pewresearch.org/fact-tank/2014/03/07/6-new-findings-about-millennials/.
 “The Generation Gap in American Politics.” Pew Research Center, Pew Research Center, 1 Mar. 2018, https://www.people-press.org/2018/03/01/the-generation-gap-in-american-politics/.
Stay tuned for the next installment of “Investing in the Impact Generation,” where we discuss millennials’ beliefs that corporations have a social responsibility to promote change in the world.
This chapter is part of a larger piece of work titled “Millennials Are Not Aliens: But They Are 80 Million People Who Are Changing the Way We Buy, Sell, Vacation, Invest, and Just About Everything Else” by Gui Costin. You can purchase the book at Barnes and Noble or on Amazon.