Editorial

Impact investing here to stay

Financial advisers need to resist the urge to roll their eyes when the issue of impact investing comes up in conversation

May 25, 2014 @ 12:01 am

impact investing, socially responsible, wirehouse
+ Zoom

Financial advisers need to resist the urge to roll their eyes when the issue of impact investing comes up in conversation — because the topic is likely to arise more often and is becoming more important to more clients.

Historically, institutional investors — particularly European pension funds — have led the charge in aligning their investment dollars with their values. But over the last few years, individual investors have jumped on the bandwagon in a big way.

According to J.P. Morgan Securities and the Global Impact Investing Network, a group of 125 impact investors that the firms surveyed committed $10.6 billion in impact investing last year and plan to increase that by 19% this year, to $12.7 billion. That's hardly pocket change.

Within that group, retail investors, high-net-worth individuals and family offices made up 32% of impact investors. Pension funds and insurers made up 22%. The rest is derived from foundations, banks and other financial institutions.

Over the past few years, each of the four wirehouses has developed impact-investing platforms, while opportunities have risen notably through mutual funds that invest in companies focused on producing measurable social impact as well as financial returns.

'GOING MAINSTREAM'

“When you have the wirehouses embracing this, that's a sign it's going mainstream,” Joe Keefe, president and chief executive of Pax World Management, told InvestmentNews reporter Liz Skinner.

Need more evidence? Just last week, at the Investment Company Institute annual meeting, impact investing was a dominant theme, with some hard-charging competitors setting aside their rivalries to agree that impact investing is here to stay.

Andrew Sieg, managing director and the head of global wealth and retirement solutions at Bank of America Merrill Lynch, said interest in impact investments is particularly keen among baby boomers, with younger investors in that generation preferring strategies that account for values other than business metrics when selecting securities.

That's going to increase the popularity of those strategies in coming years, said Mr. Sieg, who was joined on a panel at ICI by Bernard J. Clark, executive vice president of advisor services for Charles Schwab Corp., and Bob Vorlop, head of products and advice for Wells Fargo Advisors.

“I would look at the percentage of time you're thinking about impact-oriented investments — environmental, social justice strategies — and I would double or triple it,” Mr. Sieg said.

Investors are pleased as far as performance goes.

The J.P. Morgan Securities/ Global Impact Investing Network poll found that 91% of investors surveyed said their investments were meeting or exceeding their financial expectations, with about 54% targeting competitive market return rates.

And as long as advisers make it clear to clients interested in impact investing that returns may vary widely and that some financial performance may be sacrificed for social performance, they should embrace this development.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

Building digital relationships with a human touch

The word "robo" has stopped being a four-letter word for financial advisers. But how can it be an asset? Quovo's Jeff Hendren explains.

Video Spotlight

Will It Last As Long As Your Clients Do?

Sponsored by Prudential

Video Spotlight

The Catalyst

Sponsored by Pershing

Latest news & opinion

Brian Block's $4 million bonus was tied to a key metric at ARCP

Prosecution rests case in fraud trial against CFO of American Realty Capital Properties.

Edward Jones is winning the Google search war

Brokerage firm's digital marketing investment helps land it at the top of local and overall search engine results, report finds.

Voya's win in 401(k) fee suit involving Financial Engines bodes well for other record keepers

Fidelity, Aon Hewitt and Xerox HR Solutions are currently defending against similar fiduciary-breach claims.

Collective investment trusts getting more attention from 401(k) advisers

The funds are catching on due largely to lower costs and more product availability, but come with some inherent drawbacks.

Vanguard rides robo-advice wave to $65B in assets

Personal Advisor Services, four times the size of its closest competitor, combines digital and human touch.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print