Gen Z: Who else?

Our thoughts:

Concerns around climate change are felt most strongly by younger members of society. A survey by Pew Research Center shows that Millennials and Gen Zers are not just talking about the need to take action — they are also getting more involved.

With Gen Zers forming a greater part of the workforce and advocating for responsible consumerism, certain industries are more likely to grow with this paradigm shift.

Read on as specialists in sustainable investing from Mirova share how they identify which industries are well positioned to grow with Gen Z.

Meet Gen Z, which are individuals born between 1996 and 2016, and accounting for a third of the global total population(1).  They never knew a world without internet and are more likely to be connected much of the time. We also believe they are more socially and environmentally aware and not afraid to voice their opinion. They are entering the workforce and are inclined to choose companies that are more aware of sustainability. We think that other generations will have to adapt to them, not the other way around, and they better do it fast and sustainably, as we feel the Gen Z disruption is in motion.

At a glance:

• Gen Z is the first generation who never knew a world without internet: Gen Zers are always online(1)
• Their income should represent 33 tn$ by early 2030(2).
• We view this generation as environmentally and socially aware and feel that they want brands they engage with to show sustainable practices
• We believe that some industries, such as e-commerce, telecoms, online entertainment industry, digital payments and ESG*** investments should grow with this generation

Is there a key distinctive feature when it comes to Gen Z?

We believe that what really sets Gen Z aside is technology, as they have a whole different level of familiarity with it. Unlike Millennials, who came of age when internet was booming, Gen Z never experienced a world without (high) connectivity. It’s an Application and social media savvy generation. They spend more time online than any other generation(3), and would certainly have a hard time dealing with no connectivity: according to a survey led by the Central Generational Kinetics in the United-States, 58% of Gen Z would not feel comfortable if they didn’t have internet for more than four hours(3). Another key element is the role that digital plays in Gen Z’s lives: the line between their online and offline life is blurry to say the least: based on the same survey, 64% of Gen Z said within the next five years, they expect the Internet will determine what they do on a daily basis(3).

Gen Z will spend nearly 6 years of their life on social media which is more than time spent than eating, studying & socializing combined(4). They do everything online, from shopping to voicing their opinions(4): they are the most diverse generation, experienced more than a decade of social rights movements, and grew up conscious of climate change.

“For them, we think it’s not so much about what you do, it’s about who you are. We believe Gen Z wants facts, not fiction: therefore, we think transparency and engagement will be key for companies if they want these new kids to come on their block.”

Our view is that it’s actually a game changer for companies as we feel that they can have the best product on the market, but if they show poor social and environmental practices, we do not believe they will have Gen Z as customers, and that’s going to be a problem, given that they will have a big chunk of income in the coming decade(4). Their income should grow by 140% in the next five years,  representing $33 tn by 2030, reaching 27% of the global income and surpassing Millennials’ income the following year(4).

Have you identified industries well positioned to grow with Gen Z?

As Gen Z is digital by nature, we believe e-commerce should definitely accelerate, even more so given the COVID pandemic. Also, as e-commerce companies need storage facilities, our view is that the warehouse industry should grow, as well as the demand for responsible packaging. We also believe food delivery services should grow as well, especially if their offer is plant based, as meat if off of Gen Z’s menu(5). Telecom companies will also be really important as we view this generation as always on its phones.

They will not use an app or a website that is too slow to load. Since they use their phones to watch videos, anything high connectivity related should benefit. It’s our opinion that a part of the online entertainment industry, related to e-sports, gaming, music and video streaming has a big Gen Z audience.

And let’s not forget social media: as they are connected on a daily basis, which accelerates the tech platforms’ market dynamic. Added to that, digital payment solutions being the way to go for this generation, this industry should grow as well.

When it comes to finance, ESG is definitely high on their agenda: more than 4 out of 5 Gen Zers factor ESG into investing(7).

Some companies are taking measures to evolve: we see fashion houses using more diverse models and sustainable clothes manufacturers. Even though most of them won’t drive, they still will need to transport themselves, and will want to do it in a sustainable way: a lot of car manufacturers have announced that they would produce only electric cars by 2030. We feel this implies the car manufacturers have components ready and that this will trigger a massive shift. We believe there is much room for progress since we think Gen Z is all about technology, and that it comes with sustainability risks.  Given this view, we think companies need to come up with the right solutions in order to stay relevant for that audience. Regardless of the industry, when they look at a company, there are three things they find important : what you do, but most importantly how you do it, and at what cost.

“For Gen Z, either you do it right, or you just do not. To this end, we think that, for Gen Z, if a product comes with an environmental or social cost, they not only refrain from buying it, but also voice their opinion on social media. Companies need to start transitioning towards sustainability.”

This article was originally published by Mirova.

Mirova specialises in sustainable investing, and is known for its robust ESG methodology, high quality management team and proven track record. With deep expertise in analysing sustainable themes, sectors and issuers, they have a dedicated responsible investing research team that utilises proprietary internal research methods to conduct holistic sustainability assessments on companies.

Endowus currently offers the Mirova Global Sustainable Equity Fund (as of 8 Oct 2021), a portfolio consisting of a basket of high-conviction stocks from companies that contribute positively to the UN Sustainable Development Goals (SDGs), and has successfully delivered financial return together with its sustainability focus.

Get started building your own portfolio with funds like these on Endowus Fund Smart.

Footnotes***

ESG: Environment, Social, Governance​​1 – BofA Global Research, OK Zoomer: Gen Z Primer. December 20202 – Euromonitor, BofA Global Research, OK Zoomer: Gen Z Primer. December 20203 – Generation Influence: Reaching Gen Z in the New Digital Paradigm, Center for Generational Kinetics (CGK), commissioned by WP Engine4 – Source : WHO, 2020, BofA Global Research, OK Zoomer: Gen Z Primer. December 2020.5 – Source: BofA Thematic Proprietary Survey n=14,592, conducted Aug 2020 “What are your meat eating habits?”6 – BofA thematic proprietary survey conducted in August 2020 “What type of payment method do you prefer to use ?7 – Source: BofA Global Research, OK Zoomer: Gen Z Primer. December 2020. BofA Thematic Proprietary Survey , conducted Aug 2020 “Which of these are you most concerned about?”

About Mirova

‍Mirova is an asset-management company dedicated to sustainable investment and an affiliate of Natixis Investment Managers. Thanks to its conviction-led management style, Mirova's objective is to combine a quest for long-term value creation with sustainable development. Pioneers in many areas of sustainable finance, Mirova's talents are committed to innovation in order to provide their clients with high environmental and social impact solutions. Mirova manages €19.6 billion as of 31 December 2020. Mirova has been awarded the B Corp* label and the status of "Entreprise à Mission" (mission led company). Mirova US is a U.S. based investment advisor that is a, wholly owned affiliate of Mirova. Mirova is operated in the U.S. through Mirova US. Mirova US and Mirova entered into an agreement whereby Mirova provides Mirova US investment and research expertise, which Mirova US then combines with its own expertise when providing advice to clients. Mirova US manages 4,96 bn USD as of as of 31 December 2020.

*References to a ranking, award or label do not prejudge the future performance of the strategies/or the managers.

Mirova - Portfolio management company  - French Public Limited liability company Regulated by AMF under n°GP 02-014 - RCS Paris n°394 648 216  Registered Office: 59, Avenue Pierre Mendes France - 75013 Paris. Mirova is an affiliate of Natixis Investment Managers.

Mirova US - 888 Boylston Street, Boston, MA 02199; Tel: 857-305-6333 - Mirova US is a U.S.- based investment advisor that is a, wholly owned affiliate of Mirova. Mirova is operated in the U.S. through Mirova US. Mirova US and Mirova entered into an agreement whereby Mirova provides Mirova US investment and research expertise, which Mirova US then combines with its own expertise when providing advice to clients.

The information sourced from Bank of America was leveraged by permission. Copyright © 2021 Bank of America Corporation (“BAC”). The use of the above in no way implies that BAC or any of its affiliates endorses the views or interpretation or the use of such information or acts as any endorsement of the use of such information. The information is provided "as is" and none of BAC or any of its affiliates warrants the accuracy or completeness of the information.The views and opinions expressed may change based on market and other conditions. This document may contain references to copyrights, indexes and trademarks that may not be registered in all jurisdictions. Third party registrations are the property of their respective owners and are not affiliated with Natixis Investment Managers or any of its related or affiliated companies (collectively "Natixis"). Such third party owners do not sponsor, endorse or participate in the provision of any Natixis services, funds or other financial products. Natixis Distribution, L.P. is a limited purpose broker-dealer and the distributor of various registered investment companies for which advisory services are provided by affiliates of Natixis Investment Managers. This information should not be considered a recommendation to buy or sell any security shown.

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