Impact Investing: at a Tipping Point?
Impact investing is the practice of making purposeful investments that help achieve social or environmental benefits—while generating financial returns. In the charitable space, impact investing has been embraced by several prominent foundations, such as the Ford Foundation, as a way to ensure that assets ultimately committed to advancing social good through grant making are being invested in a way that aligns with those values.
KEY FINDINGS
Impact investing is catching on, particularly with Generation X and Millennials
A majority of affluent Millennial (77%) and Generation X donors (72%) indicated that they had made some form of impact investment, such as investing in a publicly traded company with good social or environmental practices. This compares with just 30% of affluent donors from the Baby Boomer and older generations.
Notably, most of those surveyed considered themselves to be experienced or very experienced investors, although investing knowledge was not a requirement of study participation.
The terminology of impact investing is not yet well known or understood—even by those who are making investments that can be categorized as impact investments
Only 37% of survey respondents said they were familiar with the term impact investing and only 31% said they had made an impact investment prior to being shown the list of possible ways they could do so.
Millennials and Generation X have greater familiarity with the terminology than Baby Boomers, with nearly half of both cohorts saying that they had heard of impact investing prior to being shown the list.
Basic education on impact investing and guidance from financial advisors would most encourage investors to make an impact investment
Overall, nearly 44% cited help from a financial advisor as the factor that would most encourage them to make an impact investment. Similarly, 42% cited having more information about impact investing. Another 42% said that having access to investments that have a track record of strong financial returns as well as social or environmental results. For the most experienced investors, having access to impact investments with a track record of strong financial returns and easy ways to invest in low-cost funds or private investments were most important-perhaps unsurprising in a field that is still growing and changing rapidly.
Investors would consider making impact investments with assets set aside for retirement, for charitable giving or for other purposes
Investors appear equally willing to try impact investing regardless of whether the assets used are ultimately intended for retirement, for charitable giving or for other purposes. For each category of asset, roughly 85% of respondents indicated they had at least some interest in making an impact investment. Among Millennials and Generation X, nearly half of respondents indicated that they were very or extremely interested in making impact investments with assets set aside in each of these categories.
Investors are interested in both simple and sophisticated options for impact investing
Investors were most interested in investing in public companies with good environmental or social practices, either by investing directly (58%) or through exchange-traded funds or mutual funds (56%). However, they also indicated a strong interest in investing in small businesses or start-ups with strong social or environmental practices (48%), venture capital or private funds focused on this category (45%) and in making loans to charitable organizations (42%).
Source: Fidelity Charitable, Impact Investing: At a Tipping Point? Report, 2018