This approach provides investors with an opportunity to align their portfolios with their personal values, while still meeting their financial wellness goals.
A Compelling Opportunity for Advisors
The appeal of “doing well by doing good” has driven significant growth in the impact and socially responsible investing sectors over the past few years, with more than $12 trillion in assets under management in sustainable, responsible, and impact investing strategies in the U.S. alone. That’s nearly 1 out of every 4 investable dollars.1
Millennials in particular are driving that interest, as they become increasingly vigilant about what’s in their portfolios:
- 67 percent of millennials agree that their investment decisions are a way to express social, political, or environmental values.2
- 73 percent of millennials agree that it’s possible to achieve market rate returns by investing in companies based on their social or environmental impact.2
With an unprecedented transfer of wealth about to take place, the demand for impact investing solutions is only likely to expand. According to the Pew Research Center, millennials are currently the largest generation on the planet, and over the next 25 years, they’re set to inherit $68 trillion from their parents.3,4
However, it’s not just millennials – women investors are often inclined to use their money to make a positive impact on the world. According to Morgan Stanley, 84 percent of its female clients have shown interest in sustainable investing, up from 78 percent in 2015.5 Women, who already control $13 trillion globally, are expected to see a $5 trillion increase to that number by 2022, which could, again, shape the future of this industry.6
While millennials and female investors may be leading the charge, they are not alone in their preference for investments that serve a purpose. In fact, 72 percent of the total U.S. population is interested in investing in environmental, social, and governance funds.7
However, impact investing can be complex and nuanced, making it difficult for investors to achieve success without the support of an advisor. As more money flows into the hands of those who want to generate greater impact with their investments, there’s a compelling case for integrating impact investing into your advisory practice.
Connect with Investors On A Deeper Level
Rather than fully delegating the management of their money to you, these investors generally want to openly communicate their expectations and understand what you’re investing in on their behalf – and the greater implications of those investments related to their personal values.
Advisors who are aligned with their clients’ values and the legacy of their wealth are in a better position to build long-term relationships based on shared understanding and deeper engagement. Demonstrating that you care about your clients and are open to their feedback and participation, in addition to offering your expert advice, also creates a partnership that can differentiate you from other advisors.
Invest with Impact: Better Portfolios, Better Outcomes
Importantly, impact investing is proving to deliver financial results. In 2017, 54 percent of all sustainable U.S. mutual funds were ranked in the top half of their Morningstar Category by performance.8 In 2018, 63 percent of sustainable funds finished in the top half of their respective categories – including 35 percent in the top quartile. Also noteworthy is that over the past four years (2015-2018), sustainable funds outperformed down markets relative to their peers.9
With the right structure and focused intentionality, you can build – and your clients can benefit from – a portfolio that achieves both a market rate return and values-based outcomes.
Envestnet provides you with strategies and solutions that support impact investing as a key dimension of your practice, including:
- A list of “Impact-Approved” investment strategies across all asset classes
- Tools for screening out companies engaged in controversial business practices
- Impact reporting, with the ability to present positive impact “stories” to your clients, as well as quantitative impact metrics that demonstrate the environmental and social impact of the investment
- Quantitative, index-based portfolios that are low-fee, diversified, customizable, and explicitly focus on companies with high sustainability ratings and/or environmental, social, and governance priorities
- Thought leadership and other resources via Envestnet’s Impact Investing team and Envestnet Institute
Our thoroughly vetted impact strategies, insightful commentary, and practice management tools – supported by proven technology and on-demand reporting – can be cost-effectively accessed, implemented, and customized to your clients’ interests, convictions, and circumstances.
Learn more about how you can better engage your clients and prospects, helping them build better portfolios with better outcomes and fostering deeper relationships positioned to sustain the test of time.
