Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Financial Planning > Charitable Giving > SRI Impact Investing

Impact Investing Is at ‘Sweet Spot’ for Advisors

Your article was successfully shared with the contacts you provided.

Investors have $13.6 trillion in impact investments, representing 22% of professionally managed assets globally, according to Amber Nystrom, founder and CEO of Trinity Nexus. and impact investing pioneer.

She referred to a 2014 McKinsey report that found assets in sustainable investments in the U.S. grew 486% between 1995 and 2012, compared to 376% growth in traditional assets.

“This is a huge market in terms of total dollars, in terms of fastest growth rate and also in terms of this being of interest to your highest potential clients, meaning women and millennials,” Nystrom said during a pre-conference session at Envestnet Advisor Summit on Wednesday.

Now is the critical time for advisors to get their clients into impact investing, she said, comparing advisors to surfers trying to catch a wave. “That wave has that perfect moment, where it’s mature enough, which is where we are in this market, but it hasn’t yet crested, so you still have an opportunity to assume that sweet spot.”

Women and millennials are key demographics for impact investing, Nystrom said, noting “women are the largest emerging market on the planet.” They already control $20 trillion, and over the next three decades, women and millennials will inherit $60 trillion, she said.

“That’s the largest economic wealth transfer in all of history. It’s going to 70% women across all generations,” according to Nystrom.

Millennials are the largest, wealthiest demographic, she added, and by 2020, one in three adults will be a millennial.

Impact investing is a “key bridge,” she said, because “this is an area where people want to have these relationships.”

Patricia Farrar-Rivas, CEO of Veris Wealth Partners, said that impact investing “is not a new animal,” and advisors can apply the same process they use in the investment research they already do.

“This isn’t a brand new science. It’s an additive to the financial science,” she said, adding “How do we actually look at those factors that are nonfinancial, material factors investors need to know about?”

“The advisor of the future is going to have to be able to work with clients to tell the story of how their investment is impactful and reaching goals of all sorts,” said Ryan Tagel, Envestnet | PMC’s director of product management.

Envestnet identified 30 SMAs, mutual funds and ETFs, Tagel said, that are designated as “approved impact select” on the research platform. Those funds and strategies are “premiere in their field in terms of impact, portfolio construction and investment performance.”

Envestnet is working with Veris and impact research firm Sustainalytics to create impact filters advisors can use in their research, Tagel said, which should be launched in fall of 2016.

Envestnet’s Impact Portfolio series launched in January uses the managers on the approved impact select list to create impact solutions for end clients, Tagel said.

The Impact Quantitative Portfolios, which are expected to be launched next week, are separately managed accounts that are priced similarly to an ETF and a low tracking error to the benchmark, Tagel said. A gender-themed and climate-themed portfolio will be released in the coming months, he said.

— Check out 5 Reasons to Talk to Clients Now About Responsible Investing on ThinkAdvisor.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.