By Thomas M. Kostigen
In a poll of attendees for an impact investing workshop, people said they would be allocating more capital to the space--but mostly into public stock.
The poll was given to more than 100 attendees of the impact investing workshop during the first day of the three-day Innovative Alternative Strategies conference held this week in Denver. Financial Advisor and Private Wealth magazines hosted the conference.
Impact investing is a fast-growing segment of the financial services industry that produces social as well as financial returns. This has traditionally been accomplished by investing in social enterprises in the developing world--usually via private-equity investments.
But the definition of impact investing is broadening to include micro-finance and environmental, social, and corporate governance (ESG) investing. ESG is similar to socially responsible investing (SRI), except whereas SRI negatively screens securities to suit investor preferences (i.e. no tobacco or firearms), ESG proactively invests in companies deemed to do good (clean energy, for example).
The results of the impact investing survey, while small, are telling. For starters, 83% of respondents said they plan to invest more in impact investments. And they indicate more appetite for liquid investments in this space. It should be noted that attendees were largely financial advisors, who often prefer liquid products for their clients to mitigate investment risk.
Still, the results hint that investors might be veering away from the traditional course of impact investing, which involves taking a private equity stake in a social enterprise that typically operates in the developing world.
Heretofore, high-net-worth individuals have taken these stakes, and often make visits to see first-hand the entrepreneurs and the projects they've invested in.
Not so much anymore, at least according to the survey takers. Respondents said they had on average more than $10 million in their portfolio of impact investments. Yet, they were less inclined to visit an impact-oriented business they were considering investing in. And since only 38% said they use an outside firm for due diligence, that implies that the majority do their own in-house research, presumably through paper audits and computer check ups.
As impact investing becomes more mainstream, so too, evidently, are the investment vehicles used to achieve those goals.