Impact Investing: Is it Right for You?

Impact Investing: Is it Right for You?

 

Highland pays close attention to impact investing, which is the practice of buying into companies and funds that aim to make positive social and environmental change. This investment strategy of “doing good to do well” is a huge priority for millennial investors and has gained traction in recent years among older investors as well.

According to the Forum for Sustainable and Responsible Investment, the total US-domiciled assets under management using SRI strategies grew to $8.72 trillion at the start of 2016. In 2012, that number was $3.74 trillion.

We expect that figure to continue to grow at a fast clip as more and more business leaders pledge to align their investing philosophy with their personal values.

It’s not just the younger generation of investors who are engaging in impact investing. A couple of years ago, the New York Times featured a few baby boomers who are putting their money into riskier, but conscientious investments, and this trend is growing, particularly among boomer women.

The dollar value of impact investing has improved over the years, although the track record indicates returns are not always as high as those of conventional securities and funds.

According to a recent article in the Stanford Social Innovation Review entitled When Can Impact Investing Create Real Impact? “The question of investment impact is of obvious importance to investors who want to make a difference. Although we do not reject the possibility of earning market-rate financial returns while achieving social impact, we are skeptical about how much of the impact investing market actually fits this description.” The article goes on to assert that “an investor who is prepared to sacrifice market returns should ask how much concession it’s worth making for the social value produced by the organization.”

Even if the odds of healthy returns are slimmer compared to traditional investments, for some people value is not necessarily measured by the bottom line.

Depending on an individual’s objectives, it can be important to invest not just with your calculator, but with your conscience.

Would you like to learn more about impact investing and whether it aligns with your wealth management values?  If so, let’s have a conversation.

John Christianson
john@highlandprivate.com
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