By Thomas M. Kostigen
New research from Tiburon Strategic Advisors shows increased adoption by brokerage firms of impact investing products and services.
"The impact investing market is likely to see the institutionalization of the business, platform development, & brokerage firm adoption," Tiburon said in its research report, "Impact Investing: Doing Well by Doing Good."
The report highlights the evolution of the impact investing market, market segmentations, distribution channels, and predictions for the industry.
Tiburon notes that brokerage firms won't be able to take on all facets of impact investing. For example, the wirehouses will unlikely let their financial advisors plug into certain aspects of microfinance.
Microfinance involves lending smaller amounts of money than traditional banks typically offer. This type of financial services offering is most prevalent in the developing world, but is taking shape in the U.S. through institutions such as Grameen America. Pooled lending and micro-insurance also falls into this category. Investors willing to partake in these programs are often offered higher interest rates because of the risks involved.
To that end, however, Tiburon says the "microfinance business should see the standardization of loan approved techniques & the enterprise of credit bureaus."
Impact investing, as defined by Tiburon, falls into three categories: socially responsible investing, community development lending, and microfinance. Tiburon notes that impact investing emerged in the early 2000s and has greatly evolved and matured. It says there are now 400 financial services firms in the space, including 100 socially responsible investment managers, 100 community development banks, and 200 microfinance institutions. It reports there are more than 4,000 micro lenders.
In terms of assets under management, Tiburon is sketchy. The firm breaks down AUM by leaders in the market, and cites the segmented assets by mutual fund, loans outstanding and "leader" assets under management--the latter being firms that typically make private equity investments.
Excluding assets from mutual funds, Tiburon's tally of impact investing assets is roughly $75 billion. This jibes with a Rockfeller and JP Morgan study conducted a few years ago that puts impact investing asset under management at $65 billion.