NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, May 27, 2014

Financial advisers need to resist the urge to roll their eyes when the issue of impact investing comes up in conversation — because the topic is likely to arise more often and is becoming more important to more clients.

Historically, institutional investors — particularly European pension funds — have led the charge in aligning their investment dollars with their values. But over the last few years, individual investors have jumped on the bandwagon in a big way.

According to J.P. Morgan Securities and the Global Impact Investing Network, a group of 125 impact investors that the firms surveyed committed $10.6 billion in impact investing last year and plan to increase that by 19% this year, to $12.7 billion. That’s hardly pocket change.

Within that group, retail investors, high-net-worth individuals and family offices made up 32% of impact investors. Pension funds and insurers made up 22%. The rest is derived from foundations, banks and other financial institutions.

Over the past few years, each of the four wirehouses has developed impact-investing platforms, while opportunities have risen notably through mutual funds that invest in companies focused on producing measurable social impact as well as financial returns.