One of the most frequent questions I get from financial advisors and investors is where they should go to access impact investments. This may be surprising—after all, it seems there is so much interest and information out there already, but most of the information and activity is focused on considering how large public companies manage their environmental, social or governance (ESG) performance. No doubt that is important, but for investors that are interested in impact investments, where the purpose of the investment is to create measurable social and environmental impact, they have to look a bit harder. This is where astute advisors can really add value to client relationships.
Impact investments differ in that rather than trying to avoid exposure to harmful industries or influence corporations to have better ESG practices, they are directly financing solutions. For example, this might be solutions that directly improve the lives of women like a microfinance institution that serves low-income entrepreneurs, reduce greenhouse gas emissions like a fund that invests in off-grid technology for rural communities, or actively contribute to the funding gap of one of the 17 other United Nations’ Sustainable Development Goals (SDGs). There are important pushes to avoid harmful industries—such as the move to divest from fossil fuel companies—and all the more impactful if those dollars are in turn invested to create solutions to these challenges, such as renewable energy.
As I’ve previously written about for this publication, investors are seeking a variety of impact investment options. So where can financial advisors find these higher impact investments? Fortunately, today’s impact marketplace offers a variety of investment options that can help build an investment portfolio with a diverse range of asset classes and risk and return profiles.
How A Financial Advisor Can Source High Impact Investments
So back to my original question—where should the financial advisor go to access some of these impact investment options? Especially as investment platforms differ, there’s still a wide variance of familiarity with impact across the advisor and investor landscape, and everyone is seeking different kinds of impact, risk and returns.
A great way for advisors to get started is to find someone within your firm or within the industry who can show you the ropes—starting with where to find the information you’re looking for. Vetting private market options can be overwhelming for the financial advisor, and there is no reason why you should do it alone. Most brokerage firms have someone that’s the “ESG or impact investment expert” and can direct you to the right resources for your platform and clients.
There are also resources like US SIF and the Global Impact Investing Network that can help, as well as lists like the ImpactAssets 50 of impact investment fund managers. So the next time you have a client looking for impact investments, the good news is that there’s a whole world of investment options out there, and a growing set of people and resources within and outside of firms to help advisors satisfy the growing investor interest.
Justin Conway is vice president of investment partnerships at Calvert Impact Capital.