Affluent Younger Investors Are Gravitating to Impact Investments, Study Says

Title: “Impact Investing: A Tipping Point?”

Organization: Fidelity Charitable

Summary: Younger investors are taking up impact investing at higher rates than their older counterparts, according to a new report by donor-advised-fund provider Fidelity Charitable. More than 70 percent of affluent investors who are millennials or Generation Xers have made an impact investment, compared with 30 percent of baby boomers and their elders.

Still, just 37 percent of all those surveyed were familiar with the term “impact investing.” And women lagged behind men in both knowledge and use of such investment options.

Different nonprofits and for-profit financial-services companies define “impact investing” in different ways. Fidelity Charitable describes it as “purposefully making investments that help achieve certain social and environmental benefits while generating financial returns.” At the close of the first quarter of 2018, $856 million held in Fidelity Charitable donor-advised funds was allocated to impact investments, a one-year increase of 110 percent.

The new report was based on surveys, conducted by independent research firm W5, of 475 people with investible assets of at least $100,000 who claimed the charitable deduction on their most recent tax returns or gave at least $10,000 to charity.

Among the findings:

• Investors reported the highest levels of interest (58 percent) in investing in public companies with good environmental or social track records, followed by exchange-traded funds or mutual funds with social and environmental investing criteria.
• Seventy-nine percent of respondents who rated giving as “very important” had also engaged in impact investing.
• Forty-four percent said they had discussed impact investing with a financial adviser.
• Among investors who described themselves as “very experienced,” 52 percent said that access to investments with strong returns would be the most important factor in opting to make an impact investment. Among all investors, the most-cited factor in deciding to make an impact investment was advice from a financial adviser.

Nonprofits Get In on the Action

Growth in impact investing isn’t limited to individuals. Nonprofits and other big institutions are also increasing the volume of dollars they plow into such investments.

A recent report by the Global Impact Investing Network, based on a survey of 229 organizations, projected an 8 percent boost in respondents’ collective impact investments this year, from $35.5 billion to $38.5 billion. Among organizations that participated in the survey over multiple years, 84 percent reported making more impact investments now than three years ago.