Increasingly, clients are concerned about the effect their investments have on the environment and society.
This is particularly true for millennials, although the concern for issues beyond financial returns on investment is found in every demographic. Many investors are looking for ways to align their investment strategies with their personal values.
No longer do investment professionals believe that impact investing requires clients to sacrifice performance. Clients can invest in ways that will help combat climate change, foster clean energy, or benefit developing economies. Impact investing can facilitate technologies that will create benefits for future generations.
Clients who are planning for the future typically prioritize putting together a succession plan that emphasizes their values. How an advisor helps clients transmit values through intergenerational wealth transfers is one of the most important performance indicators. There are several steps advisors can take to craft the right impact message for clients.
First, determine and define what is important to your client in terms of impact. What causes do they support and how can you balance investment performance against positive impact? Many clients value investments that make an impact in their own communities; for example, a municipal bond strategy that supports a local public service could be attractive.
It helps to have a framework to base strategies upon. The United Nations’ Sustainable Development Goals can help you in assessing investment opportunities. However, be mindful that there are 17 different goals enumerated, so you and your clients may want to focus on specific themes of interest rather than the entire list.
Investors who want to make a difference can find it challenging to consider impact opportunities, but advisors can suggest a variety of ways to invest. There are investment funds geared to socially responsible investing, and ETFs, mutual funds, stocks and muni bonds can all offer investors way to put their money to work fostering their values. Consider creating a sample portfolio to help clients understand how impact investing can fit with their overall goals.
Finally, take the time to educate your clients. There are many studies that have demonstrated the value of impact investing and its effect on portfolio returns. Once clients have seen that it is possible to combine returns and values, advisors can leverage impact strategies to expand their practices.
For more, please see:
Creating Your Impact Investing Message | Wealth Management