Earning above-average wages, they have enough money and time to consider the world around them and their impact on it. Across industries, companies have begun to examine this potentially lucrative segment in search of access. How can they attract these consumers who want socially responsible products and an opportunity to interact with companies that share their values?

Rob Taylor, the CEO of Kleinwort Benson Private Bank, contributed to an internal Allianz report on LOHAS consumers. He says the LOHAS segment is fragmented, but the group is singular from the values perspective: “The LOHAS consumer has gone through a thought process and evolution that has made him more sensitive to environmental and social issues.”

After the 1950s and 1960s, in which many consumers felt motivated by effort, duty or responsibilities, came “hedonistic” decades of materialism, achievement and selfishness. It seems the trend has changed. Now since the 1990s, many consumers are focused on experiences, spirituality and the natural world. For Taylor, one central question for managers is this: “Is your business aware enough of how society has evolved?”

The key to unlocking the LOHAS market, says Taylor, is appealing to the group’s sympathies and values. LOHAS consumers need to feel good about the way they spend and invest their money. When searching for firms to invest in, the LOHAS consumer will lean to those that use clean production methods and embrace sustainability. A 2007 survey sponsored by Allianz Global Investors said 71% of respondents saw environmental investments as offering potential for long-term growth.

Nobel Laureate and former US Vice President Al Gore, who co-created the specialist fund manager Generation IM in 2004, is a champion of the environment and a proponent for investing in it, too. “There’s a big story and opportunity around the supply side of cleaner energy,” says Gore. “We expect to see opportunity in businesses that are involved with lower-carbon energy, including renewable energy provision, such as wind, solar and cellulosic ethanol production.” 

When looking for financial services and asset managers, LOHAS consumers may seek firms that offer a variety of socially responsible vehicles or use sustainable or green energy for their own operations. Gore says, “Many investors now agree that sustainability issues do materially affect a company’s ability to generate returns. Sustainability is increasingly main-stream, which makes sense given its impact on profitability.”

Gore finds CEOs are now more in tune with environ-mental realities adding, “They may have started with concerns about brand protection and reputation and the like. But once they got into it, it was as if a whole new world of opportunity and new markets opened up.”

Yet the LOHAS consumer wants more than just talk about sustainability from the CEO. A CEO’s or an asset manager’s standing as an employer is important, too. The LOHAS consumer wants to be identified with a company that treats its employees fairly and has an ethical approach to managing people and assets as part of its long-term perspective and commitment to sustainability.

Gwynne Rogers, the LOHAS business director at the Natural Marketing Institute in Pennsylvania, says LOHAS consumers want to move from being purchasers to being participants in what a brand means. “Consumers want to believe in what the brand stands for. They want a story and a deeper relationship.”

Rogers sees real opportunities for asset management companies in the LOHAS sector. Some 33% of LOHAS consumers are aware of and interested in learning more about socially responsible investing (SRI), but only 10% are invested in this area. Additionally, SRI lags behind other categories of spending for LOHAS consumers. Rogers suspects that many individual financial advisors don’t have SRI on their radar screens and therefore don’t pro-actively communicate with their clients about these kinds of funds.

Claudia Langer is the founder of a network of people in Germany who strive to consume responsibly and encourage others to do the same. Fondly called Utopians, the network includes consumers who fit into the LOHAS profile. Langer’s community (www.utopia.de), with about 35,000 members and millions of page impressions, is the largest community of its type in Germany.

Given the current financial crisis and near runs on banks, many consumers are reconsidering their investments and investment strategies. Langer says the consumers she represents want “peace of mind” investments in every sense of the word: “Utopians want to do good with their money, trust their asset managers and trust the company they do business with. They’re even willing to give up some returns if they have peace of mind.” And if an SRI investment strategy is more profitable in the long run? Mr. or Ms. LOHAS can reap the rewards with a clear conscience.

Published by PROJECT M in June 2009