In a previous post, we addressed two of the four common hurdles faced by investment advisors with respect to impact investing as noted in Financial Advisor Magazine. If you’re new to impact investing, it can be beneficial for investors to work with their financial advisors, a strategy that I wrote about in Chapter 8 of my book, Integrated Investing. In this post, I’ll examine two further hurdles and how investment advisors can overcome them.
Wondering how to identify which products are actually impactful or how to add impact investments in a way that complements your existing advisory practice? Check out our previous post.
Hurdle 3: I don’t want to give up returns.
Financial returns depend upon a number of factors including asset class, diversification, and management style, however investing for impact doesn’t mean investors have to forego returns. There is evidence of socially responsible investment options performing as well or better than conventional benchmarks, for example, the iShares MSCI KLD 400 Social ETF.
“Going back to the 2008 crash, KLD dropped with the broader market. But it managed to outperform the S&P 500 when the economy was at its worst and has had a more impressive rebound — jumping 185% since its March 2009 bottom, compared to the S&P’s 171% bounce.” —
“While the KLD 400 has outperformed the S&P 500 over the past 25 years, it is just one social index and it does not necessarily represent the entire SRI industry.” —
With impact investments in private ventures, ventures building new disruptive innovations have the potential to generate strong returns while building impact into their business model from Day 1.
Hurdle 4: I don’t know how to talk to my clients about impact investing.
There are a number of resources to help you get better informed about impact investing, including the Global Impact Investing Network and MaRS Centre for Impact Investing. Before you can discuss impact investing with your clients, you should think about what impact YOU want to see in the world. What does impact mean to you? Pique published the quintessential reading list for impact investing, to help you get a broader view of the issues the world is facing and what are potentially some of the creative, innovative solutions to those challenges.
For more impact investing resources and tools, check out Integrated Investing: Impact Investing with Head, Heart, Body, and Soul, available at all major online book retailers.
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