More options for impact investing through fixed income are needed, according to advisors who participated in an Incapital survey.
More than half (58 percent) of advisors with three to nine years of experience said they need more fixed-income options for conservative investors who are interested in environmental, social and governance issues. Thirty-four percent of advisors with 10 years or more of experience agreed, according to the survey of 200 advisors released Tuesday.
Incapital is an underwriter and distributor of fixed-income securities based in Boca Raton, Fla.
The younger generation of advisors and investors “has had more access to information on social impact investing than any before them, so it is no surprise that millennials and the generation of advisors that serve them, are like-minded in their support of results-driven causes,” said Louise M. Herrle, managing director and head of Incapital’s Legacy platform for distributing social impact investments. “They understand that they can achieve their clients’ financial goals with investments that reflect their personal values.”
However, “advisors are looking for options that best match their clients’ risk tolerance,” she added. “Equity ESG funds may have too much risk for some conservative clients. Advisors are finding that social impact bonds—which do carry credit risk but also [have] the benefits of income predictability, return of principal at maturity and declining interest rate risk as the maturity date approaches—can be utilized as part of a conservative income portfolio strategy.”
Although some advisors are searching for ESG fixed-income options, more than 70 percent of the advisors said it will require a “significant correction in the equity markets to wake all investors up to the portfolio benefits of fixed-income investing,” the survey said.