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March 20, 2017 at 06:46 AM
Sustainable, responsible and impact investing currently captures $1 out of every $5 invested by asset managers in the U.S. or more than $8 trillion, according to the U.S. forum for Sustainable and Responsible Investment (US SIF), and that number is growing.
(Related on ThinkAdvisor: 5 Ways Big Investors Are Challenging Traditional Investment Strategies)
Demand has been increasing steadily over the past few years but now appears to be accelerating as investors react to policies of the new regime in Washington.
“I’ve definitely seen an increase in the pace of impact investing,” says Jennifer Kenning, the CEO and co-founder of Align Impact, an advisory firm serving individuals, family offices, foundations and endowments and a resource for wealth managers and RIAs.
“In the past advisors could have deferred or delayed on requests about impact investing. Now they have to find a way to respond.”
Indeed, Tim Freundlich, president of ImpactAssets, which runs a donor-advised fund and works with asset owners, philanthropists and wealth advisors to advance social and environmental change, says investors and wealth advisors have “an increased sense of urgency in aligning and deploying high-impact capital to what they see as a fast opening gap from government policies.”
As a result of that urgency, he’s seeing more inflows into private debt and equity investments where “investors believe they can directly move the dial on impact through companies and funds.”
The greatest interest is in climate solutions and economic development, says Freundlich, but he’s also seeing increased focus on inclusivity and equitability.
Kenning says investors’ interest in environmental issues goes beyond investing in green projects and companies and avoiding fossil-fuel producers. “When an advisor says you don’t own Keystone pipeline,” investors want to know if they own banks that are loaning funds to TransCanada, which is building the pipeline.
She also sees interest in providing working capital and loans to fund affordable housing and health clinics for women and girls, whose funding will be cut under the Trump administration and Republican Congress.
“People see that the burden is shifting to the private sectors, that we cannot rely on government or corporations. This is a huge trend.”
More specifically, they see the cuts that President Donald Trump is making to budgets of federal agencies and nonprofits. He’s signed executive orders to dismantle President Barack Obama’s clean water rule and defund health providers overseas that discuss abortion, and he has proposed a federal budget that among other things would slash the budget of the Environmental Protection Agency by 31%, the budget of the National Institutes of Health by 20% and the budget of the Department of Housing and Urban Development agency by 13%.
