21 January 2019

The Growing Demand For Impact Investments

Written By David Newman in Investor Solutions

The Growing Demand For Impact Investments

The formative years of my career were spent in wealth management; advising high net worth clients and family offices.

Working with these clients naturally involves consideration of their broader life goals and wealthy individuals have a long and storied history of donating their wealth towards good causes they believe in. These investors have however, historically, compartmentalised their wealth between ‘for-profit capital’ and their ‘philanthropic capital’ at two opposite ends. This shift in mindset is changing.

Understanding the Impact

Many individuals are altering their approach to these two distinct buckets of capital and blending them into a middle ground - impact investing. We believe this stems from push factors from both ends of the traditional spectrum.

Today’s wealth creators are increasingly entrepreneurs and when they allocate capital, for profit or not, they want to understand the Return on Investment. This generation of ultra-high net worth clients bring the same approach to philanthropy as they do to their business and want to understand more about the impact they are having.

The New Normal

From the “for profit” side of the equation, it should not have escaped anyone’s attention that the asset management industry is increasingly allocating to sustainable and ethical investments and incorporate ESG assessment into much of their decision making process. Many investors are a various points on this journey, having potentially started by excluding certain harmful companies or industries from their portfolios before moving toward portfolios that are pro-actively investing in companies serving a social purpose.

As both ends of the traditional pots of capital change their approach, we find ourselves moving towards a middle ground where todays’ wealth management clients are increasingly considering how they use all of their capital to help create a world they want their children to grow up in. They are positively allocating to areas where the societal and environmental impact of their wealth fits with their own values. This will be the new normal.

The Drivers Behind the Growing Demand for Impact Investing

The drivers behind this should not come as a surprise. Investors simply care more about what their wealth is doing; it is an emotional connection to the implications of their actions. The industry has moved beyond traditional approaches to return and should now consider emotionally adjusted risk adjusted return: am I happy with what I am investing in?

We established Delio to help the wealth industry better connect with this emotional dimension of investing, albeit from a different lens.  We saw a need for wealth managers to build propositions to serve the needs of clients to allocate to private investments that they feel better connected to. What we didn't quite appreciate in the beginning was the clear demand for impact investments from private clients and family offices and today, 25% of our revenue now comes from private impact investments and this continues to grow as clients come to understand that supporting causes they believe in and using their  wealth for good does not mean a trade-off against financial goals or sacrificing returns the appetite grows.

A Trend that is Not Going Away

The shift in how the wealth management market is responding is clear of how important this is to ultra-high net worth clients and family offices today. What has typically been a slow moving industry is rapidly evolving by building new propositions. This would not be happening if it wasn't for high, sustained, growing client demand for impact investments. This is not a fad; this is a trend that is not going away. 

 

If you would like to discuss how we are working with wealth managers and fund managers operating in the impact investment space, or if you are interested in learning more about the effect we see increasing demand for impact investing having on the wealth market please do get in touch.

Up Next ...
04 November 2024

Finance apps are in ‘need of improvement’, says a quarter of Brits

A recent survey by UK mobile specialists Apadmi reveals that ...

04 November 2024

Barclays acquires Tesco Bank

Barclays Bank UK PLC has completed the acquisition of Tesco ...

04 November 2024

fundcraft Increases Series A to €11 Million Demonstrating Strong Product-Market Fit

fundcraft has increased its Series A funding to €11 million, ...

01 November 2024

Mollie and Hyvä announce strategic partnership, launching Hyvä Commerce

Mollie, a leading financial service provider, has partnered with Hyvä, ...

More in Investor Solutions

London Stock Exchange invests in private markets business Floww

16 March 2022

The London Stock Exchange has made a strategic investment in ...

UK’s Robinhood rival Freetrade raises $69mn 

23 March 2021

Freetrade, a stockbroking platform, has raised $69mn Series B funding. In ...

Public raises $65mn from Tony Hawk, others  

16 December 2020

Social investing app Public has raised $65mn Series C funding.   In Brief:  ...

Posted By The Community

Finding The One: How important it is to find the right investor for your start-up

10 August 2020

Covid-19 has the start-up community in a frenzy. Funding rounds plummeted by 22% in March, valuation...

Written By: Globacap

There are no Knowledge Bank in this category

There are no Events in this category