An article in Business Green.
Generation Y has little interest in challenging unsustainable investment practices, potentially undermining the move to a low-carbon, climate-resilient economy.
That is the warning contained in new research by think tank Green Alliance and commissioned by Hermes Fund Managers, which outlines how sceptical attitudes towards saving and investment among young people could shrink levels of private investment in the low-carbon economy over the coming decades.
report, based on focus groups with 37 young professionals born after 1980, argued that without “significant growth in investment” in low-carbon sectors the so-called Generation Y cohort will retire “into a world seriously affected by dangerous levels of climate change”.
Every year since 2005, under 30s have on average saved and invested more than they have spent repaying debt, with the one exception being 2011. This creates a huge opportunity for the savings and investment industry, given that there are 14.5 million adults in the UK aged between 18 and 34.
But the report highlights how this demographic is largely unaware of how their savings are being exposed to climate change-related risks. Moreover, the research finds Generation Y is becoming “highly sceptical” about the benefits of investing, both from a personal finance perspective and as a means of driving improved sustainability across the economy.
As a result of a combination of poor understanding about financial services, low levels of interest in personal finance, and disillusion with the financial services industry following the credit crunch, Generation Y overwhelmingly prefers to keep its savings in cash accounts.
It concludes that unless the finance industry changes its messaging on climate and environmental issues or rules such as auto-enrolment in sustainable savings schemes are brought in, Generation Y may end up with diminished pensions and savings that are overly exposed to climate change risk.
“If Generation Y are to enjoy decent pensions, their savings need to be resilient to climate change,” said Matthew Spencer, director of Green Alliance. “A $1tr (£600bn) opportunity exists for investment into green infrastructure. Helping Generation Y to understand this would create a win-win for savers and the environment.”