Big, bold, brash—terms typically associated with star money managers, advisors and their high-net-worth clients. But what if they were also applied to more altruistic pursuits, while at the same time achieving solid returns in the investment portfolio?
It’s the thinking, at least in part, behind impact investing in public equities; the desire not to just invest, but invest in a manner that addresses societal and environmental challenges.
Enter the 2030 Sustainable Development Goals (SDGs) adopted by the United Nations General Assembly in September 2015— a list of 17 audacious initiatives, including eliminating poverty, fostering decent work and economic growth, and responsible consumption and production. Designed to track where (region, goal), how much and by whom (private, government, charitable) resources flow, they immediately resonated with member countries.
The SDGs also provide advisors with a definition of the planetary and societal needs, as well as products to offer clients that align with individual values. The 17 global goals provided by the UN SDGs are therefore a win-win for all involved.
A new report from InvestorFlow finds the most popular UN SDGs—from an impact investing capital allocation standpoint—include No. 1 (no poverty), No. 3 (good health), No. 6 (clean water) and No. 7 (affordable and clean energy).
So why, specifically, should advisors develop an expertise in impact investing and UN SDGs?
Three reasons are readily apparent:
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Recent U.S. Trust and Morgan Stanley surveys have revealed that more than 80 percent of younger investors and women evaluate socially responsible factors before reaching an investment decision. High-net-worth investors are also increasingly considering these factors as well.
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A transfer of wealth amounting to several trillion dollars is anticipated over the next two decades as assets shift to younger family members.
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A variety of socially responsible methodologies are getting increased attention.
Simply put, advisors who fail to recognize this shift of thinking in investor attitudes may miss out on a significant opportunity.
For those skeptical of impact investing’s staying power, consider that sustainable investment strategies have attracted roughly $23 trillion worldwide as of 2016, a 25 percent increase from 2014.