Impact Investing Entering Mainstream Financial Planning
By Dan Sherman
“Advisers who don't believe Impact Investing will play a meaningful role in their own client strategies aren't seeing the writing on the wall,” according to William Burkhart in a recent article in InvestmentNews.
In fact, some of the largest asset management companies around the world appear to agree. And the new awareness of investing for positive impact is not limited to investment advisory firms. More than half of Fortune 100 companies are working on climate change-related initiatives, and 93% of CEOs polled in a 2010 Accenture survey indicated that sustainability would be key to the future success of their companies.
In large part, we can attribute the changing attitude toward corporate responsibility and the rising emphasis on environmental sustainability to changing demographics; in particular, the coming of age of a new generation of investors.
The individuals controlling and spending money in today’s economy are increasingly focused on green products. According to Rod Godelnik in Tripplepundit, consumers have increased their purchases of hybrid vehicles, organic food, and other products seen as green at a far faster pace than the overall growth of the U.S. Economy. It should, therefore, not come as a surprise that these individuals are placing an ever greater emphasis on Impact Investing.
An exceptionally large, untapped source of investment capital is controlled by next-generation investors. Many of those in the current (older) generation of investors follow the traditional model of “doing well, then doing good”—making money regardless of how, and then giving back some of their profits in the form of charitable donations.
Next-generation investors are more focused on “doing good and doing well”—making money and making a positive difference with their money, at the same time. Not surprisingly, next-generation investors have consistently ranked impact ahead of overall return in investment criteria.
The numbers suggest that the rising interest in investing for impact won’t be slowing down any time soon, as next generation investors stand to inherit $41 trillion.
At First Affirmative, we understand that the ways we save, spend, and invest can dramatically influence both the fabric and consciousness of society. We believe that in addition to the benefits of ownership, investors bear responsibility for the impact our money has in the world. Are you making conscious decisions about the impact of your consumer purchase and investment decisions?
Mention of specific companies or securities should not be considered an endorsement or a recommendation to buy or sell that security. Past performance is no guarantee of future results.
Posted: July 22, 2014