By Jerilyn Klein Bier
More wealthy investors are starting to explore impact investing, and demand for such investments is expected to surge.
Impact investing is commonly referred to as investing that targets both environmental and/or social impact and financial returns. The concept casts a wide net, with investments involving microfinance, community development and social enterprises attracting particular interest. Other sectors provide access to energy, sustainable forestry and agriculture, health and education, affordable housing and so-called bottom of the pyramid investing, which refers to the portion of the global population earning less than $3,000 a year.
Dismissing or resisting clients' interest in impact investing isn't likely to bode well, says Julia Balandina Jaquier, a Zurich-based impact investment expert who has researched motivations and practices of over 40 high-net-worth individuals and family offices involved in impact investing
A number of HNWIs and family offices talk about their impact investing strategies in Balandina's recently published Guide to Impact Investing for Family Offices and High Net Worth Individuals, a 200-page paperback resource filled with guidelines, tools, case studies and stories. Some of the people profiled in the guide say they're irritated by lack of responsiveness to their impact investing goals from their traditional advisors, and some have even switched advisors as a result.
Balandina says she expects demand for impact investing to grow both from the generational shift and from mounting evidence that it can help wealth holders achieve both financial and non-financial objectives.
She recently spoke with a young philanthropic family which, having faced continuous resistance from its advisors on including impact investing in its personal and foundation portfolios, is now changing its investment mandate to specifically include family values. For them, impact investing is part of their family values and they want their wealth managers to take fiduciary duty for this.
"If their current advisors cannot demonstrate their ability to meet this broadened fiduciary duty, this family is prepared to take their money away, which will result in a loss of several hundred millions for their current wealth manager," Balandina says.
She notes that impact investing is a great opportunity for advisors to differentiate themselves from peers, attract fresh assets particularly in the ultra-high-net-worth segment, and create a more personal and client-centric relationship with existing clients.
Broad And Complex
Balandina advises financial institutions, wealth holders and the Swiss government on impact investment strategies, and also teaches at the University of St. Gallen, one of Europe's leading business schools. She acknowledges that the young, fragmented impact investing market is challenging to understand and approach, and that the lack of a common definition makes it hard to determine its size.