As we move into the space of this new year, it is time to take stock of the trends, capture what we have learned, and make some predictions for 2017. While a volatile year for our markets and political arenas, 2016 was a big year for Impact Investing. Some of us watched from the sidelines while many of us participated in the expansion and growth of this fast-paced movement. Initially confined to a small framing as an alternative, or separate asset class, the notion of impact investing has grown in leaps and bounds, challenging aspects of modern portfolio theory and expanding into and across the entire investment portfolio. We are seeing an increasing number of investors looking for a double and triple bottom line in their returns, seeking values alignment in multiple asset classes as well as within each of their financial transactions. As the movement continues to gain momentum, here are some trends to watch for in 2017.
More people coming on board, and many ways to learn and get involved
As impact investing becomes a thing—and it has—we are seeing an expansion in the number of convenings devoted to education on this topic. From groups and conferences specifically dedicated to impact investing such as SOCAP (Social Capital Markets), Gratitude Railroad, TONIIC and GIIN, High Water Women, Confluence Philanthropy and others, to standard finance conferences incorporating aspects of impact investing, investing with values is now an agenda item. In 2017, we will see even more professional time allocated toward gathering impact investing practitioners and thought leaders, to rolling out new products, and discussing and debating current, emerging, and best practices.
In addition to the multitude of convenings coast to coast, various groups are offering webinars to their members and to the public. More thought-leaders are authoring books, blogs, white papers and articles uncovering ways to be a conscious investor. All of this means more people are sharing ideas about how to align investments with values, as well as methods to design for social and environmental returns, and theories on using finance as a tool for social change (Just one great read from fall of 2016 is Gender Lens Investing by Joseph QuinLan and Jackie VanderBrug, and one to look out for Spring of 2017 is Clean Money Revolution by Joel Solomon).
While we would expect folks from the traditional financial industry to take an interest in this new trend (and they are) what is also interesting is that impact investing is springing up in many other spaces, outside of the traditional banking and finance arenas. Women, millennials, activists, those concerned about the climate, non-profit leaders, and others are seeing impact investing as a way to align their actions and their assets with their values. Impact Investing is being seen as a way extend philanthropic missions, and expand capacity to make change, as many begin to literally invest into the world we each want to see. For many in 2017, impact investing will become a way to amplify their voices and to vote their values with their wallets, through their financial transactions and holdings.
Uncertainty of terms and potential for “green washing”
With all of the fervor and growing enthusiasm to seek more than a financial bottom line, and with more and more people jumping in from various backgrounds, we are already seeing a dilution of and confusion of terms about what impact investing actually is. 2017 will continue to be a year where we’ll see many people talking apples to oranges, as we see further discussion of investing definitions, and various efforts to coin terms and define meaning. We as a movement will, slowly, move toward clarity about what impact really is. Whether the intention of the investor to “do good” qualifies, or whether we look strictly to measurable outcomes, will come under much debate in the months ahead.
2016 saw the big banks carving out their stake in the impact market. Beginning with the 2015 Goldman Sachs purchase of boutique firm Imprint Capital, 2016 saw many large, traditional firms either looking to acquire Impact expertise or build their own teams. As client demand grows and the Impact Investing market expands, many are going to want a piece of this increasingly popular, and economically lucrative pie. What does that mean? And what will this look like?
The good news for 2017 is that we are seeing client demand increase with individual investors voicing their preferences to their financial advisors. Some of this demand is resulting in thoughtful product development and platforms (One such platform is Investibule, making impact investment accessible at low minimums). However, we are also going to see quite a bit of green-washing from various stakeholders. We are already seeing the big banks with large marketing budgets positioning themselves as impact investors, asserting that they are now the go-to place for banking with values, or investing with impact, when actually in many cases their marketing budgets are much larger than their meaningful product offerings.
Similarly, some of the old school Socially Responsible Investing (SRI) firms are looking to be included as well. We are already seeing some of these SRI firms re-branding themselves as “impact” houses to keep up with the trend. While screening out “sin stocks,” “bad players,” and companies that have poor environmental practices is not at all a bad thing, this practice of negative screening of companies from a limited universe of publicly traded enterprises is not what many people believe to be true impact investing. Without a clear shared understanding of the terms, there stands to be much more confusion in the market as SRI firms and others begin re-labeling their products as “impact.” The good news here is that many individuals and groups (such as Paul Herman of HIP Investor Ratings) are working on impact assessments and ways to measure the social and/or environmental impacts of our investments. These efforts will provide ways to analyze and compare both positive and negative impacts across the investment portfolio. We are all looking forward to more clarity and precision in measuring impact in 2017 and beyond.
I remain committed to exploring these trends and more in my blog and in my forthcoming book in the months ahead, and will continue to post on these engaging debates in the field. Stay tuned for an exciting year ahead!