Trends Towards Social Impact

Introduction:

Recently, the trend in the business world has been to go towards businesses that have a social aspect. Whether that be sustainability in the case of BlackRock, or more recently Goldman Sachs and representation. This makes sense financially for these companies, as by 2025 millennials are going to make up 75% of the work-force, and the biggest consumers. Alongside this wave of millennials comes a generation devoted to social impact.

BlackRock:

In BlackRock’s case, Larry Fink has stated that going forward, they are going to put sustainability as one of the top criteria when investing. Fink also associated climate change and climate risk to investment risk. Fink also seems to be a believer in long-term investing and attributes a sustainable company with better long-term investments. BlackRock has also declared they will actively vote against companies that go against their own views.

Goldman Sachs:

Goldman Sachs’ CEO, David Solomon issued a resounding statement: Goldman, the largest underwriter of IPO’s in the U.S., will no longer take any company public if they don’t have a director who is female, or in any way diverse. Solomon hopes that by doing so, it will improve representation in the boardroom and C-Suite. Furthermore, Goldman wants to expand this by 2022 by requiring two diverse members in the boardroom. This is a requirement only in the United States, and Europe, and not yet implemented in Asia. However, it seems that Goldman is going to lose out in the short-term, as most VCs tend to have all-male boards and directors. Leading to business leaving Goldman and into the hands of other banks.

Implications:

I think that as the millennial consumer base starts to expand, more financial companies are going to see a shift towards social impact. Especially because, according to a study done by Nielsen, 73% of millennials are willing to spend more on a product if it comes from a sustainable brand. Fink and Solomon are trying to cash-in early on the millennial market and improve their companies image for a more socially aware work-place and consumer.