By Jerilyn Klein Bier
There's been a lot of recent buzz about impact investing, which aims to generate social and environmental impact along with financial returns, but most investors are still sitting on the sidelines. The point of entry isn't easy because the majority of these investments are structured as either private equity or private debt. And for people with the financial means to get in the door, it's easy to get lost in this cavernous space.
"There are always new companies and new ideas," says Michael Alpert, a shareholder and wealth manager with San Francisco-based Wetherby Asset Management. 'It's a very large and changing landscape. It's challenging for the normal advisor to take this on, be well-versed and do due diligence."
Wetherby isn't exactly the "normal" advisor. It does a lot of its own research in impact investing, which 5% to 10% of its clients have some kind of exposure to. But to help better navigate this arena it enlists the assistance of Imprint Capital Advisors, an impact investment firm.
Imprint, also based in San Francisco, has approximately $150 million under advisement and a client base that spans from high-net-worth individuals (HNWIs) to foundations and large institutions. The firm also works with HNWIs through financial advisors and family offices.
Finding The Right Investment
When it comes to working with family offices, Imprint develops a strategy based on its mission, objectives and financial parameters, and then documents this in a financial policy. The next steps entail sourcing the investments, performing due diligence and making recommendations. The client ultimately makes the investment decisions. A family office can also elect to have Imprint execute and monitor its account.
Regarding financial advisors, Imprint works with them in one of two ways. The more popular option is co-managing a client's account. In this case, Imprint would carve out an impact investing piece within a client's portfolio (for example, $5 million out of $20 million) and help craft the strategy. Another option for advisors is to use Imprint's help desk that provides access to research, analysis, due diligence and recommendations. The advisor can then put clients in investments according to how they understand their interests.
Taylor Jordan, Imprint 's co-founder and managing director, says that over the past five years it has gotten a lot easier to find impact investing opportunities. Much of this has been demand driven.
Public awareness of this space has grown, partially due to active promotion by the Rockefeller Foundation and others. Jordan says the financial crisis may also be contributing factor, as HNWIs have become increasingly disillusioned with the general market's flat returns the past decade, lack of transparency among some types of investments, Madoff-style Ponzi schemes and perceived greed. "People want to have more meaning with their money," he says.
"Given the scale of social and environmental problems globally, we think impact investing is a key tool to help solve those challenges," says Jordan, adding that unlike philanthropy, the returns made on this space can also be recycled into other impact investments.