‘Impact’ Investments Expected to Have an Impact

What you might think of as socially responsive investing (SRI) or taking into account environmental, social and governance (ESG) factors has come to be known as “impact investing.” And a new report says that this belief that investments should align with personal values and societal goals is being embraced by investors of all types.

Greenwich Associates and American Century Investments conducted research with more than 50 professional buyers at intermediary platforms and more than 150 financial advisors who work with high net worth and individual investors – and found that three-quarters of decisionmakers for intermediary platforms and 80% of intermediary advisors believe client allocations to affect investments will increase in the next three years.

However, the study also found that platform-level decisionmakers and financial advisors disagree about nearly all aspects of impact investing, including the fundamental question of how to define the category.

Impact ‘Ed’

That said, in that a standard definition appears elusive for the category, Greenwich Associates uses the following definition provided by the Global Impact Investing Network (GIIN), which it says is the closest thing the field has to a trade association: “Impact investments are investments made into companies, organizations and funds with the intention to generate measurable social and environmental impact alongside a financial return.”

Participants in the study say they are attracted by two main benefits:

  • The ability to make a positive contribution to society
  • The ability to align investments with personal values

IPS Factoids

Based in large part on these perceived benefits:

  • 86% of advisors report that they include impact investments in client investment policy statements;
  • nearly half say investment policy statements include stated objectives for impact investments; and
  • almost 40% say their investment policy statements provide a required allocation.

The most striking difference between platform decisionmakers and advisors is found in their viewpoints about investment returns: While 44% of advisors would be willing to accept lower returns in order to achieve a positive social impact, only 11% of platform decisionmakers agree.

Ninety-two percent of advisors say they are satisfied with existing offerings overall, and similar shares express high levels of satisfaction with the social impact (36% of advisor “very satisfied”) and, separately, the investment performance of their impact investments and managers (30% of advisors “very satisified” versus 45% of platform decisionmakers). In each of these categories, relatively large shares of advisors rate themselves as “very satisfied.”

However, a full two-thirds of platform decisionmakers at RIAs say they are not satisfied with current impact investment offerings overall, and half are dissatisfied with the social benefits achieved by their impact investments.

Want to know more about “Impact” investments, or environmental, social and corporate governance (ESG) investments? Check out Workshop 10: “Environmental ‘Impasse?’ – What You Don’t Know About ESG…And Should” at the 2017 NAPA 401(k) Summit. You’ll find out what you need to know about that option that still isn’t on your plan menu.

Find out more – and register today at http://napasummit.org.

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