The demand for impact investing has spread from institutional investors to retail investors, leaving financial advisors little choice but to include such investments if their clients want them, and more of them do.
“It’s hard to know the amount of global [impact] assets. But three-quarters of millennials and three-quarters of women agree with the UN Principles for Responsible Investment,” said Zachary Karabell, Envestnet’s head of global markets who led a panel at the firm’s advisor summit in Grapevine, Texas. That’s two to three times the number of baby boomers, said Karabell.
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Nicole Davis, partner at Veris Wealth Partners, described the growing demand from millennials and women this way: “I make choices where my food comes from. Why do I own companies whose products I would not buy?”
But impact investing goes beyond excluding certain stocks or bonds from a portfolio, according to the panel discussion entitled “State of the Market and Opportunities for Impact.” It also includes assets in portfolios that align with what an investor believes in, a “conscious consumer mindset,” said Ali Caffery portfolio manager, Envestnet |PMC.
“There’s an explosion of product” in the impact space, “and many will end up on the Envestnet site,” said Davis.
Davis said among impact investment issues, climate change, other environmental issues and gender issues are attracting the most interest from retail investors.
These types of impact investments are also the easiest to implement in the public market, said Davis, who added that there is also growing interest community wealth building to mitigate the consequences of growing income and wealth gap and in sustainable agriculture.
Investments in ways to slow climate change and boost gender diversity also have the most potential among impact offerings, said Caffery.
“Incorporating women in leadership diversity and on boards in leadership positions allow companies to outperform,” said Caffery. (Studies by Catalyst, Credit Suisse and McKinsey found that public companies with one or more women on their boards tend to perform better.) Other companies can benefit from the move away from fossil fuels, explained Caffery.
Starting the Discussion