If you've been following the research about generational spending and lifestyle habits, you know that millennials are a vastly different kind of consumer group when compared with other generations. Millennials are some of the most likely to take a brand's commitment to sustainability and social impact into account when making decisions.
However, millennials aren't a monolith—some are driving the move toward sustainable consumption a lot more than others.
Below, we'll cover the millennials who are turning to green living and how they may affect investing that considers environmental, social and governance (ESG) factors.
There are ways to divide millennials into groups that show which ones are driving sustainable growth with their purchases.
One researcher, Jason Dorsey, an expert who often speaks about this generation and how they spend their money, recently told Business Insider that he divides them into two categories: me-llennials and mega-llennials. While both fall under the millennial umbrella — born between 1981 and 1996 and now aged 24 to 39 — the two have very different spending habits and experience sets.
The first group, the me-llennials, fell behind during the recession. They identify more with the struggles that typify reporting on millennials — lower incomes, less spending power and high debt.
They're also typically behind in their professional careers, meaning they may struggle with trying to boost their incomes and pull themselves out of debt. Like all millennials, they're likely to have a variety of skills but less consistent experience, in part because they often pursue their own unique navigation of the job market.
The second group, by comparison, is doing a lot better and does not identify as much with the struggles traditionally associated with millennials. These mega-llennials tend to be financially secure, are advancing in their fields and aren't holding on to high levels of debt.
This two-set grouping is supported by income data. The average millennial made around $35,500 per year in 2018, less than the living wage in some cities, according to estimates from SmartAsset. But not all millennials are struggling, the financial technology firm noted: Some of the highest-earning millennials reported incomes of more than $180,000 in 2018.
This leaves some money to spend on sustainable goods, which are still often priced higher than conventional products on the market.
Sustainability and luxury aren't quite synonyms, but there is a surprising overlap between the two.
Luxury retailers are some of the biggest adopters of sustainable practices and branding, in part because they can pass on the higher costs of eco-friendly manufacturing to their customers.
Millennial spending habits and income distribution will likely make ESG investing a sounder strategy, but only in certain cases. Companies selling luxury goods — or brands targeting demographics with cash to spare — will probably do the best when introducing sustainable products and be more likely to benefit from interested buyers.
While most evidence suggests that the vast majority of millennials want to shop sustainably — 73 percent of them are willing to spend more to buy from eco-friendly brands — not all have the money to get what they want.
Cash-strapped millennials, even if they are personally committed to sustainability in their daily lives, often can't afford the markup. Instead, they turn to other ways to make their lives more eco-friendly — like do-it-yourself projects, recycling and thrifting.
Companies targeting sustainability-minded consumers with less cash may only be successful if they keep in mind how much money their target audience has on hand.
Millennials are some of the biggest drivers of sustainable growth. But wide income distribution leaves some with a lot more cash on hand than others. This means that while sustainability can be a good strategy for brand growth, it may not always work depending on a company’s target demographics.
Luxury brands and companies that target wealthy millennials are likely to do the best because they'll be more able to pass on the costs of eco-friendliness to their customers without risk to their business.
As a result, ESG investment strategies can be successful, but only if they take into account the income distribution of millennials.
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