Terry’s topic is one that has been in the news a lot lately. Recently, I published a posting on the subject based on The Economist’s conclusions about the current state of ESG as a standard by which investments are measured beyond the traditional financial performance indices.
In this posting, Terry looks specifically at technology companies and the challenges they face in attracting and retaining younger generations as investors. As always your comments are welcomed.
Whether publicly traded technology companies have verified sustainability plans in place or have been accused of greenwashing, environmental, social, and governance (ESG) standards continue to trend upward. A record $649 billion was poured into ESG-focused funds worldwide in 2021.
As investors continue to put money into technology companies making a difference, there is a misconception that a majority of investors belong to younger generations. New research shows the distribution in ESG-motivated investment: 54% are Gen Z and millennials, 42% are baby boomers, and 25% are Gen Xers.
From combatting climate change to expanding diversity in the boardroom and instituting more corporate equitable policies, technology companies need to understand what Gen Z and Gen X care about. If any sector of the global economy is sensitive to ESG it should be technology with its appeal to younger audiences. That’s why the recent acceleration of widespread reporting on ESG principles and practices is creating a shift in power, money and jobs from baby boomers to millennials and Gen Z, in which passive investing, COVID, social injustice issues, the Great Resignation and talent shortages are all contributing factors.
Despite there not being an exact right way to go about a company’s ESG strategy, contributing to fighting climate change, specifically the threat of global warming, seems to be the most concerning for Gen Z and millennials. Social and economic equity throughout the entire corporation, however, seems to be just as significant because of widespread coverage of this subject in the news, blogs, videos and on social media.
Even if not investing in ESG-based funds, millennials and Gen Zers are seeking to join companies declaring their ESG credentials. Gen Z talent today makes up 46% of the full-time U.S. workforce, where governance factors, such as flexible healthcare plans, mental health programs, and charitable and social-cause support are part of the corporate culture. For Gen Z mentorship and employer engagement are key concerns in choosing the workplace in which they want to be.
Young investors like young employees look for ESG principles and practices in corporate reports. The lack of ESG transparency, on the other hand, has a negative impact on their views about technology companies.
Rating ESG practices presents a challenge. Ratings require proxy advisors who make this their specialty. One such is Institutional Shareholder Services (ISS). How much do younger generational investors value ESG scores when considering employment or investment? The data shows they gravitate to technology companies with ESG scores 25% higher than the average.
Unfortunately, ISS and similar proxy ESG advisors are not terribly transparent about the way they analyze and score corporate practices. The result is these proxy advisors continue to mislead young investors about ESG funds that reflect an actual company’s “do good” ratings. That’s why there is a call to make ESG ratings and calculations transparent. Proxy advisors, however, are resisting calling their methodologies and calculations proprietary. So what began as a public relations and marketing effort by corporations to show employees and customers they are responsible actors, is now functioning in a similar way to credit scoring. Credit scoring proxies, however, have established credentials earned over decades. ESG proxy advisors on the other hand are still figuring out the essentials. But companies who refuse to include ESG in reporting may find themselves increasingly out of synch with those with investment capital.
If a technology company’s ESG rating by proxy advisors, like ISS, does not appear transparent to younger generational investors, the best approach for corporate boards is to think about utilizing all the digital channels available to engage this demographic.
One example of interacting digitally with millennial and Gen Z investors can be through virtualizing annual general meetings (AGMs). According to a packaging software company, Lumi, it received a 70% increase in the number of participants attending AGMs in 2021 compared to 2020 through virtual access.
Moreover, technology companies can also think beyond virtual AGMs by inviting directors to regularly contact younger shareholders or messaging them over social media to maintain their interest while getting their feedback. It is a vehicle that can be used to shape corporate programs and policy development while performing valuable outreach to younger investors and potential employees. Generating this type of authenticity counters proxy advisor ratings that may inaccurately reflect a company’s ESG credentials. Younger investors today are more “greenwash” sensitive than ever, to the point that they seek independent confirmation of corporate environmental and social responsibility, reward those that pass muster, and walk away along with their investment dollars from those that don’t.
Is it easier to get youth to invest in the technology sector today because of a growing interest in corporate ESG reporting? Yes. But that doesn’t mean youth loyalty comes automatically. Technology companies need to continuously demonstrate their ESG credentials to keep the loyalty of this new generation of shareholders.
]]>The Z-generation born between 1997 and 2012 is choosing sites like Twitch.TV for live-streaming and gaming, Discord for hanging out with friends, BeReal to create, store and share memories, and Poparazzi to share candid pictures with friends.
How Gen-Z-focused are these new platforms?
Twitch.TV demographics show close to 75% of viewers are between the ages of 16 and 34.
Discord’s demographic is between the ages of 13 and 25.
BeReal demographics show that 80% of users are between the ages of 16 and 24.
Poparazzi notes that 95% of its active users are under age 21 with over 75% between 14 and 18.
So what’s turning off Gen-Z about using “old” social media like Facebook, Instagram, WhatsApp and others? Is this adolescent rebellion at work or does it represent different ways of thinking by a generation born after 1997?
Social media began as a young adult thing. Young adults were its creators and predominantly its users. They aged along with the apps created for them. To this day, Facebook and YouTube are the platforms of choice for this demographic. There is also substantial use of other platforms including Twitter, Instagram, LinkedIn and Pinterest.
TikTok is more cross-generational. It holds an equal interest for Gen-Z and older social media users. The demographics show that 48% of TikTok users are between the ages of 18 and 29, 22% are between 30 and 49, and 14% are between 50 and 64.
The heavyweights of social media remain YouTube (81%) and Facebook (69%) with billions of users. Instagram is used by 40%. LinkedIn is used by 30%. Trailing are Twitter and WhatsApp at over 20%. The number for Twitter surprises me considering its visibility in the media as the platform for celebrities and politicians.
According to a recent Pew Research study looking at Americans’ social media use, there has been little variation in the numbers described above for several years despite the nature of information and disinformation appearing on social media sites, and the harnessing of these sites by interest groups and bots (software that emulates humans to disseminate or gather information).
Why is Gen-Z moving to new social media platforms? The most significant difference between younger and older social media users, according to Target Internet, is how the former favour images over text. Gen-Zs would rather make video recordings or take pictures. Older social media users do both, and the oldest like me are more text-heavy.
The new apps described above are very much oriented to images as is TikTok. Of the old guard, only YouTube still connects to Gen-Zs with many young people using it for video promotions to support their latest gig economy business.
The 50-to-65-year-old crowd and people my age in their 70s gravitate to Facebook (less to Instagram, and even fewer to Twitter) where they connect to family and friends using both text and image. The 50 to 65 set consider a Facebook profile de rigueur. While LinkedIn remains a business and professional community, and a career and job hunting site. And Instagram appears to be where people in many age groups post pictures of food they get served at restaurants.
Note: I haven’t mentioned Reddit, Snapchat, Tumblr and other social media apps that remain in the mix. Of these three, Snapchat is the only one that appeals to Gen-Z but even then, the gravitational swing is to the newer apps.
When Facebook changed its name to Meta it was pointing to social media embracing virtual and augmented reality. But there is another trend at work more about communication and less about gaming, and shopping. This is social media’s dark side where the sharing aspects of social media and its ability to reach like-minded people anywhere are creating communities of like-minded people who find each other to share ideologies, conspiracy theories and organize. The January 6th, 2021 assault on the U.S. Capitol was facilitated by this trend within social media.
A different perspective on where social media is going is offered by Scroll Mantra, an India-based marketing communications firm. It sees several coming trends that include:
As I looked at these predictions I wondered if any took into consideration Gen-Z. Nothing referenced more visual content and less text, more social sharing and less selling (maybe the last point reflected the latter). So it will be interesting to revisit this topic five years from now to see the state of social media at that time. In the world of high technology, five years is a very long time.
]]>