Create change, strengthen your portfolio, and stay on top of investment trends.
While the monetary success of a portfolio is always critical, many investors are thinking about their investments on a new level. With high levels of unrest, environmental issues, and social disruption, individuals are hoping to use their investments to make a change. There are various types of investing that can make a change in the world, including socially responsible investing (SRI), impact investing, environmental, social, and governance investing (ESG), and more, all with various levels of influence on the planet. Impact investors have the opportunity to create a change they feel the world needs while also maintaining a healthy portfolio. In this article, we will cover the basics of impact investing and impact investing trends around the world. Contact Alpen Partners below to begin your impact investing journey today.
Impact Investing Basics
By adding that extra layer that says your investment can also make a change to our planet, impact investing can transform the culture around investing. Socially-minded investments can quickly become a major trend that investors can take advantage of. Impact investing can easily become the new normal. Impact investing is a strategy that focuses on earning an investor a healthy return and generating a positive social impact. The term, coined in 2007 by the Rockefellers, has been used to describe investments with the invention of generating a financial return and environmental or social good. With this strategy, investors all around the world align their existing investment portfolios with global issues. Impact is being made on issues, including food insecurity, sustainability, and social issues. For example, one of the biggest issues global investors face is creating single-use plastic alternatives. Earth’s bodies of water are increasingly plagued with plastic bags, straws, and packaging. Companies worldwide are manufacturing sustainable alternatives, and investors are finding this sector promising.
Many investors are concerned about an impact investment’s ability to offer a healthy return. All investors should consider the risk of an investment, weighing the potential downfall of the investment against the financial gain. WIth an impact investment, there is the added factor of the level of influence the investment will make on the world. Many investors find this dynamic hard to grapple with at first. Before choosing an investment, understanding the level of risk you are willing to take and the level of impact you are hoping to make. In 2019, according to the Global Impact Investors Network (GINN), there is roughly $228 billion in impact investing assets, which is nearly double from the year prior. Further, there is a huge misconception that impact investments do not stand up to traditional investments. JP Morgan has reported that impact investments can potentially earn $400 million to $1 trillion in capital!
Impact Investing Trends
Now that we have covered the basics of impact investing let’s take a look at some of the impact investing trends that are sweeping the world. Millennials are beginning to influence the way we invest. While they are still concerned with making a profit, they want to use their portfolio to fight climate change, reduce waste, and more.
One of the leading sectors of impact investments is climate change. Within this sector, investors are funding clean energy, sustainable production alternatives, and clean food production. In 2020, one of the biggest drivers of this trend is the clock that tells us that we need to make a huge environmental impact before 2030. Although climate change is one of the leading sectors, social change subsectors are beginning to grow in prevalence. For example, creating affordable and sustainable housing for working-class people has grown in population. By creating affordable housing or giving lower-income people access to financial services, local economies have the fuel to become stronger.
Here is a list of other sectors that have gained popularity:
- Women-led small businesses
- Indigenous-led businesses
- Opportunity zones
- Small businesses
- Community development
Another trend, according to GIIN, is the returns that are being offered by impact investments. In a recent survey, 90 percent of impact investors found their financial goals were met or exceeded, and 98 percent claimed their impact goals were met. Impact investments are no longer saved for ethically-minded individuals who are okay with losing some of their wealth. Impact investing is now a commercially acceptable way of investing. Startups are not the only options for those hoping to make a change. Large banks are also getting in on the trend. UBS launched its first impact investing funds in 2015, which raised $51 million. In 2016, investment surged to $471 million for an investment fund dedicated to cancer research initiatives.
Final Thought on Impact Investing
Impact investing is not going away any time soon. The future of the world depends on the success of impact investing, and it is clear that investments that are environmentally and socially-minded have gained traction among investors of all kinds, such as financial institutions, family offices, foundations, and private wealth managers. Luckily, there are so many options out there for high net worth individuals. As an added bonus, impact investing can help investors diversify their portfolios to reach global markets, allowing them to hedge against regional market volatility.
Whether you are hoping to influence the way the world works or diversify your portfolio, finding the right impact investment requires some assistance. The expert team of Alpen Partners is prepared to find the perfect investment for you. The world is changing, and so is the way we invest. Don’t get left behind. While this sector has proven to offer healthy returns, it is still a relatively new way of investing. Ensure your wealth is going to grow. Alpen Partners is ready to assist in creating the financial future that you are working hard to create. Our experts can help with financial planning, portfolio diversification, preparing your family for the future, and more!
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