The following is an excerpt from the book titled “Investing in the Impact Generation,” written by Bill Davis, CEO of Stance Capital. This is the fourth installment of a six-part series.

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In a 2017 Cone Communications Research Study, the authors point out that Millennials expect companies to play a significant role in creating positive social change. Put another way, they expect the companies they work for and buy products and services from to not only have strong corporate social responsibility (CSR) practices, but also values that align with their own. Millennials reward companies that show effort and positive results, and they punish companies that are socially tone-deaf and insincere.¹

Consider Under Armour for a moment. The CEO was recently ranked by 24/7 Wall Street as one of the worst CEOs in America.² To be sure, this ranking is driven by financials not social issues, and given the stock has lost 4/5 of its value over the past three years, it’s easy to see why the CEO is on the list (at #4). But a contributing factor was his endorsement of Donald Trump in 2016 and the resulting brand impact with its younger and more educated customers. Mismanaged social issues contributed to financial woes.

Another example: Papa John’s. The founding CEO was forced to resign over poor performance, which he subsequently blamed on the impact of NFL players’ anthem protest on pizza sales. Despite wide criticism of his comments, a neo-Nazi media outlet then endorsed Papa John’s as the pizza company for the alt-right, which created still more problems. But despite mismanaging the NFL’s political crisis, this company has been facing social headwinds for years. Millennials care about healthy food and thus disfavor pizza companies such as Papa John’s. And further, the CEO had well documented worldviews that align with far-right politics. Again, not something to be rewarded by Millennials.

While Papa John’s and Under Armour (and others) have been making bad social responsibility decisions, Patagonia took a different path and in December of 2017 strongly advocated against the Trump Administration’s decision to scale back protection of several national monuments. They subsequently sued the Trump Administration. And were rewarded with increased sales from environmentally active (notably Millennial) consumers. Today, Patagonia’s website has a section called Patagonia Action Works. Essentially it is a portal with an interactive map that connects consumers to local grantees funded by Patagonia tackling problems in areas such as biodiversity, climate, communities, land and water. When you buy something from the website, the very last thing you see is a page showing that they are donating 1% of your sale to an environmentally-focused organization in your local area.

Which clothing company do you think Millennials want to work at, buy products from, or invest in: Under Armour or Patagonia? The contrast isn’t always this stark, but Millennials will do their homework get to the truth, and then reward or punish brands. And then they’ll use social media to spread the word. As you read this it may seem as though I am making a political argument, but actually I am talking about risk. Companies are people and people have values, so it’s hard to keep values away from Corporate America. And when politics in America was mostly different shades of the same color none of this really mattered. But when you combine divergent values with massive buying power, and the intent to link commerce with social justice, this poses significant risk to companies on the wrong side of this generation.

Authenticity matters. While most people view brands as an extension of themselves, younger Americans are willing to pay more for products and services from companies that earn their endorsement. And the cost to the companies is authenticity, as Cone’s CSR study also points out: “Americans expect companies to stand up for issues far outside their operational footprints – from immigration to LGBTQ rights. Companies should determine if they can authentically stand up for social justice issues and be prepared to step into the spotlight.”

So what does this all have to do with investing? Everything, as Millennials will want their financial investments to reflect their core values. Before we dive into this topic lets first examine their wealth today.³

¹ 2017 Cone Communications CSR Study. 17 May 2017.

² McIntyre, Douglas, and Jon Ogg. “20 Worst CEOs in America 2017.”, 26 Dec. 2017.

³ Ibid.

Click here to read the fourth installment of this series.