Impact investing soars with $12 million green bond sale by Merrill Lynch

Last week's purchases illustrate the growth over the last few years in investment options tied to social improvements

Aug 26, 2014 @ 10:50 am

By Liz Skinner

Merrill Lynch Wealth Management advisers sold $12 million in green bonds issued by the World Bank last week, surpassing what the investment bank expected based on similar issuances a few years ago.

About 70 clients bought the AAA-rated World Bank Green Bonds, which mature in 10 years though are callable after a year. The bonds, which pay a 2.32% coupon per year for the first five years and step up to a maximum of 8.82% per year, will fund World Bank-financed projects focused on low carbon development.

Orders for the bonds were “meaningfully higher” than anticipated, considering two sales of similar bonds in 2011 totaled $2 million and $3 million each, said Kirstin Hill, managing director and head of wealth management product origination for Bank of America Merrill Lynch.

“Demand came from a wide variety of clients — some excited by the AAA-rated security that also allowed them to invest in achieving positive environmental outcomes,” Ms. Hill said.

Last week's Merrill Lynch sale illustrates the growth over the last few years in impact investing, an approach that targets companies or projects that can effect positive change in a community or further a cause, while at the same time delivering a financial return.

(Read the related cover story, “When money has an impact.”)

Clients are demanding more impact investments, and there are more investment options available today that offer social improvements and a real positive return compared to a decade ago, said Surya Kolluri, managing director and manager of private wealth and retirement policy and planning at Bank of America Merrill Lynch.

Advisers are responding to client demand and learning how to incorporate impact investing into a portfolio, he said. The firm offers a day-long program on investments with an environmental, social or governance (ESG) focus and how to discuss the topic with clients.

About one-third of Merrill Lynch's 13,800 advisers have done business in ESG, and a smaller, unspecified number are “power users,” Mr. Kolluri said.

Even outside Merrill Lynch, which has made a corporate commitment to impact investing, advisers are finding that many clients want to link their portfolios and their social goals.

Surveys show impact investing is one of the most important criteria for younger investors, such as Millennials, said Beth Stelluto, chief growth officer of Impact Assets, which offers a donor-advised fund and publishes an annual list of 50 investment managers who specialize in the segment.

“As that kind of interest evolves, we'll see the market evolve,” she said. “We already are.”

(Read the related special report story, “Female clients' unique approach to investing.”)

Advisers looking to help clients invest with impact have two issues that guide them toward the right investments, she said. The first is wealth.

Those with the least amount to invest are typically steered toward socially responsible mutual funds, or donor advised funds that investment and donate philanthropically, or community investment notes, such as those issued by the Calvert Foundation, Ms. Stelluto said.

For those with more resources, there are private debt and equity funds, which typically require investments of $250,000 or $500,000, she said.

The second consideration is the specificity of the investor's mission.

Those with broader social or environment goals, such as poverty alleviation, will have many more investment options to consider than someone focused, say, on the intersection between health and buildings. Such a specific mission will likely have to be met by financing private projects, Ms. Stelluto said.

More on why socially responsible investing is taking off:

0
Comments

What do you think?

View comments

Recommended for you

Upcoming Event

Jul 10

Conference

Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in four cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Latest news & opinion

RIA in a Box acquired by private equity firm Aquiline Capital

New owners plan more growth for the software service provider.

IBDs with the most female reps

Here are the 10 independent-broker dealers that have the most female reps.

Supreme Court decision likely to prevent brokers from filing class-action lawsuits

However, it likely won't bar employees from filing 401(k) lawsuits against their employers.

5th Circuit denies states' second attempt to defend DOL fiduciary rule

The three-judge panel split again, 2-1, in deciding not to take another look at the motion to intervene by California, New York and Oregon.

Pass-through tax strategies for business-owner clients

Shifting business structure, changing filing status and spinning off equipment are examples of ways business owners can take advantage of the deduction.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print