Top 5 reasons impact investing can grow your wealth practice

Nicole Sara Sivens
July 31, 2018
8 min read
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Socially responsible investing has arrived and is disrupting wealth management. 

Impact investing, a type of socially responsible investing that focuses on long-term growth and the generation of positive social and environmental outcomes, is poised to grow among retail investors in the coming years.

What’s driving the growth? Client demand is at the forefront, followed by attractive risk and return attributes. Additionally, clients are generally better informed, and like that their shareholder influence drives the decisions companies make. Now that impact investing has a more respectable track record, individuals are looking for investments that align with their values like, climate change, disease eradication and renewable energy.

There are 5 outstanding reasons to offer impact investments to your clients:

It’s a $12 trillion opportunity

According to the Business & Sustainable Development Commission, $12 trillion in market opportunities will be unlocked in four economic systems: food and agriculture, cities, energy and materials, and health and well-being. This is around 60 percent of the economy and critical to delivering the United Nations Sustainable Development Goals (UN SDGs).

By investing in companies aligned with these goals, your clients stand to reap the benefits.

The unsurprising news is that Millennials have stepped up to lead the charge in this opportunity. And with the $59 Trillion they are projected to inherit, they will have the assets to do it.

70% of Americans feel that their values should align with their investments

Consumers and investors alike are beginning to realize the power of voting with their dollars. Just as buyers are increasingly on the hunt for more ethical options when shopping, so are investors when it comes to stock purchases. It’s no longer enough to just buy green, investors are starting to holistically incorporate values-based decision making into their wealth planning.

80% of investors are interested in sustainable investments that may be customized to meet their interests and goals

Like everything else, customization is king. Customers today are used to having it their way and their investment options are no different. Choosing a values-based investment strategy is highly personalized and the ability to exclude or add a few holdings to a pre-chosen portfolio is an extremely attractive option for investors.

75% of all investors (and 86% of millennials)  are interested in sustainable investing

It’s not exactly new on the scene, but sustainable investing is having a moment. Good press, strong returns, and concern for the state of the planet have brought this innovative style of investing to the forefront and investors are loving it.

98% of investors were happy with their impact

Does that seem a little high? We thought so, too, but time and time again, the research shows that when people invest for more than just returns they’re more pleased with the results. Impact investors do make money – in fact, impact has outperformed the S&P for the past 25 years – and they do make a difference in the world. You can’t put a price on that.

"S&P 500" is an abbreviation for the Standard & Poor's 500 Total Return Index, a market-value weighted index of 500 stocks chosen to reflect the risk/return characteristics of the large cap universe and one of the common benchmarks for the US stock market. The MSCI KLD 400 Social Index comprises companies with high Environmental, Social and Governance (ESG) ratings and excludes companies involved in Alcohol, Gambling, Tobacco, Military Weapons, Civilian Firearms, Nuclear Power, Adult Entertainment, and Genetically Modified Organisms. The index aims to serve as a benchmark for investors whose objectives include owning companies with very high ESG ratings and avoiding companies that are incompatible with specific values-based criteria. The Russell 3000 Index is a capitalization-weighted stock market index that seeks to be a benchmark of the entire US stock market. It measures the performance of the 3,000 largest publicly held companies incorporated in the US based on market capitalization. It represents approximately 98% of the American public equity market. The S&P 500 Index, MSCI KLD 400 and Russell 3000 performance shown above is shown for illustrative purposes only. Swell’s portfolios differ from these benchmarks in that, among other factors, Swell’s portfolios are managed, primarily comprised of small and mid cap stocks, undiversified, bear fees and may vary materially in volatility. Past performance is not indicative of future results.

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