Spurred by extreme weather and new science bolstering fears of catastrophic events, more investors are taking climate change and other societal issues to heart when they decide to where to put their money.
Patricia Farrar-Rivas, founding principal, CEO and COO of Veris Wealth Partners, says investors are seeking different kinds of investment options, ones that can have a lasting impact beyond the bottom line.
That’s a change from not so long ago when only high net worth individuals in California or New York were concerned about such high impact investing.
Everyone else, said Lori Hardwick, EVP of advisory services for Envestnet, “was sort of on the outside looking in,” and while some financial advisors may have wanted to gauge their clients’ desire for more socially conscious, sustainable ventures, the question was an awkward one to ask, mainly because advisors did not have the requisite information and tools at their disposal.
Today, though, that awkwardness is gone. Clients are not afraid to ask for sustainable investments and advisors across America are looking to not only educate themselves about impact investing but also figure out where the best options lie.
In response, Envestnet last month expanded the capabilities of its Envestnet Impact Investing Solutions program (first launched in 2008 in partnership with Veris), to offer impact investment services through its Portfolio Management Consultants group (Envestnet PMC).
During the past year, the program’s assets under management jumped 82% to $750 million, reflecting the increased desire of both advisors and clients to channel money into investment vehicles with a sustainable, meaningful goal.
Of course, the majority of the money going into impact investing still comes from the uber-wealthy, who, Hardwick said, more actively seek these opportunities and have greater access to them.
But the idea behind programs like Envestnet’s is to level the playing field so regular investors can also partake in impact investing, not just because it is becoming more popular, but also because it’s becoming increasingly profitable, Hardwick said.
“Many advisors are still learning and we’re hoping to be able to give them the tools they need to be able to ask clients the very important question of ‘how do you want to align your world view with your investments,’ ” Hardwick said.
Today, more and more people believe that impact investing is the smart way to invest, Farrar-Rivas said. This is a large space with many different components, and “we believe the opportunities are across all asset classes in public and private markets,” she said.
Investing in emerging alternative energies, sustainable agriculture, and small and medium sustainable businesses to build communities and grow employment are not only key areas for emerging market countries, but also can prove profitable avenues for investment, since they enable sustainable economic growth for the long-term.
Across emerging markets, financial instruments have always been drivers of change, Farrar-Rivas said, “so when we think of emerging markets we see [impact investing opportunities] across all assets classes – public, private, domestic, international, and developed and developing geographies, and the tools to assess these opportunities are also becoming more available.”
Farrar-Rivas also said she believes that financial advisors who can get up to speed on impact investing solutions will have an edge over their peers.
“Clients are asking their advisors for impact investments – providing these opportunities helps them stand out from other advisors,” she said. “This is becoming a tool every advisor needs in their tool chest.”
Envestnet works with 30,000 advisors and since 2008, has worked closely with Veris Wealth Partners to consistently strengthen the sustainable investing capabilities, sourcing and adding innovative separately managed account, mutual fund and exchange-traded fund strategies. Recent additions include sustainable fixed-income strategies from Breckinridge Capital Advisors and equity offerings from Dana Investment Advisors and Trillium Asset Management.
Through the years, the number of U.S. investment firms offering these types of investing options has also grown steadily, Hardwick says.