Millennials and Women Redefine What It Means to Be a Reasonable Investor

Asset managers are going to need access to good sustainability data to meet the needs of Millennial and women investors over the coming decades.

Recently, my TEN-year-old daughter eagerly picked up a copy of Institutional Investor. Seconds later, disappointed, she wailed, “MO-OM, this is not about sharks at all!” She had seen the fish on the cover (a marked departure from the typical portraits of older white men) and assumed it would be of interest.

I consider my daughter very reasonable; she is, in fact, a long-term investor. Her allowance and the occasional cash gift from grandparents are invested in stocks of her choice, with the hopes of someday affording college and a pony (not necessarily in that order). However, with her gap-toothed grin and Taylor Swift T-shirt, she is not who typically comes to mind when a securities lawyer utters the phrase “reasonable investor.”

It’s time to confront reality: The face of the reasonable investor is changing. Over the next 40 years, Millennials in North America will inherit $30 trillion in wealth. In the U.S. women are expected to control half of private wealth by 2020, roughly $22 trillion. Not surprisingly, their values affect their investing decisions. In a recent interview Pax World Management CEO Joseph Keefe stated that women and the Millennial generation “increasingly want their money to be making a difference. They want a fair return, but they also want to have a positive impact. They want their money aligned with their values.”

So what exactly are those values? Millennials are twice as likely as members of older generations both to invest in companies and funds that seek specific social or environmental outcomes and to shun investments in businesses that engage in unethical activity. And although the majority of individual investors say they care about sustainable investing, women express higher interest than do men, 76 percent to 62 percent.

Millennials and women want to invest with sustainability performance in mind, but they lack the data to do so. Although some companies prepare sustainability reports, each report is unique, covering different issues using different metrics, making it difficult for investors to compare corporate performance on critical dimensions of sustainability.

This dearth of information is especially problematic for Millennials. According to Accenture, a majority of them identify as “self-directed” investors, taking time to research options and check multiple sources before making major decisions. To be able to identify trends, price risk, and capitalize on opportunities, investors need comparable metrics and complete data sets on material sustainability factors. I founded SASB to help address this need.


The good news is that the basis for providing investors with this data already exists. Since 1933, Regulation S-K has required the disclosure of material information in annual filings. The U.S. Supreme Court defines material information as what a reasonable investor would consider important in the total mix of information. The problem is that the reasonable investor has been treated in law, finance, and accounting monolithically, as embodied on many of the covers of Institutional Investor — old, white, male, and, well, institutional. Like the world we live in and the market that fuels our economy, the “reasonable investor” has evolved, and so must our understanding of that term. As described by Tom Lin, “In order to better protect all investors, financial regulation should shift from an elegantly fictitious, singular view of reasonable investors towards a more truthful, pluralistic view of diverse investors.”

Another challenge in meeting the needs of today’s responsible investor is the scant number of women in asset management. In the U.S. women with a personal income of at least $100,000 control decisions over $11.2 trillion, or 39 percent of the nation’s estimated $28.6 trillion of investable assets, according to a recent study. Yet female asset managers are still a rare species. Research published last year showed women are much more likely to become accountants, doctors, or lawyers than fund managers, with female portfolio managers running just 2 percent of U.S. mutual fund assets. According to the Financial Times, the number of female portfolio managers in the U.S. has fallen every year for the past six years, despite continued efforts to bring more women into frontline asset management.

In 2046 my daughter will be 40. She will be in her investing prime — the “reasonable investor” that the SEC exists to protect. If the trajectory holds true, she will drive her family’s investment decisions. I hope she can type in a ticker and get sustainability fundamentals right alongside financial fundamentals — and take it for granted, the way we now take financial data for granted. I hope she can find companies that are profitable and aligned with her values. I hope she can easily seek advice from a female investment manager or become one herself. And I hope that if she gets a subscription to Institutional Investor, she will see an evolved representation of today’s responsible investor, and not just the same old great white “sharks.”

Jean Rogers is founder and CEO of the San Francisco–based Sustainability Accounting Standards Board.