According to Global Impact Investing Network (GIIN), the growing impact investment market provides financial support to address some of the world’s concerns in sectors such as sustainable agriculture, renewable energy, conservation, micro-finance, and affordable and accessible basic services including housing, health care and education.
Impact investments strive to create positive impact beyond financial return such as a social benefit. Impact investing has grown into a multi-billion-dollar market over the past several years. J.P. Morgan and the Rockefeller Foundation’s Global Impact Investing Network (GIIN) expect the market to swell to $500 billion by the year 2020. A major reason for this expected growth is the impending transfer of wealth from parents to their children. Millennials and Generation Xers stand to inherit between $30 and $40 trillion dollars from the Baby Boomer generation.
Millennials and Impact Investing
Millennials are especially concerned with how to make the world a better place. Schroders Global Investor Study 2016, found that Millennials (aged 18-35) are more likely to place greater importance on environmental, social and governance (ESG) factors than older investors (aged 36+). The survey found that the Millennials viewed ESG factors as equally as important as investment outcomes when assessing investments. They desire double benefits from their investments, both social and financial returns. Millennials are more likely to engage with brands when issues of social responsibility are important to the company. (For related reading, see: Socially Responsible Investing: How Millennials Are Driving It.)
TOMS Shoes is a popular company with a reputation for its various impact investments. Through the sale of shoes, TOMS provides shoes, sight, water, safe birth and bullying prevention services to people in need. The company works with over 100 giving partners. BoGo Bowl also gives back after someone buys a product. BoGo Bowl sells dog food and donates a bag to shelter animals for each bag purchased.
Millennial investors with an interest in general or specialized causes can seek advice on this topic from financial advisors or wealth managers. They can also look to their financial service providers for examples. U.S. Bank invests in innovative programs designed to serve local community needs. They reach communities through the U.S. Bank Foundation, Employee Matching Gift Program, Dollars for Doing and corporate contributions.
And social media is a huge force in this space. Young adults today use social media as a platform to voice opinions on investments and share news of companies who share their values. "Millennials believe social media can be their megaphone to make an impact on issues they care about. This group is far more likely to use social media to address or engage with companies around social and environmental issues," according to the New Cone Communications Research survey.
One way Millennials can start getting involved with impact investing is by sharing information on companies’ ESG criteria and activities, as well as express their views with posts and comments. People want to make their money count and help others in the process. Education is the key to profitable investing and philanthropy. Since philanthropic activity alone cannot contribute to sustainable results, I believe investors of all ages must educate themselves on impact investing.
A useful resource is the IRIS website. IRIS is an initiative of GIIN, and according to the website, “IRIS is the catalog of generally accepted performance metrics that leading impact investors use to measure social, environmental, and financial success, evaluate deals, and grow the sector’s credibility.”
(For more from this author, see: What Is Tactical Asset Allocation?)