Advisors Accelerating Impact Investing: A Toniic to Speed Progress Toward 100% Impact
Editor’s note: Throughout 2017, NextBillion is organizing content around a monthly theme, dedicating special attention to a specific sector alongside our broader coverage. This post is part of our focus on impact investing for the month of October.
It’s easy to get on board with the idea of investing your money in a way that brings financial returns and has a positive impact on people and the planet. But hitting your stride as an impact investor isn’t always as straightforward as the argument in favor of it. What’s one way to accelerate the journey to impact investing? Access to advisors who understand the impact you want to achieve, and can provide the services to make it happen.
In Toniic’s study for last year’s T100: Launch Report, we found that investors with advisors are moving faster into impact than those without. However, while today there are more impact firms and product offerings to choose from than ever before, information on impact intermediaries such as advisors and consultants, especially for private asset owners, remains sparse. Considering how it can accelerate an investor’s journey to impact, shedding light on the advisor resources available – especially for individual investors – is important for the growth of the impact sector.
Our newest report, T100: Insights from Impact Advisors and Consultants 2017 is based on input from 37 impact advisors and consultants in 12 countries who are partnering with Toniic 100% Impact Network members to move their portfolios to 100 percent impact. The T100 Project is a longitudinal study of the portfolios of some of those investors. It reveals insights into the impact journey and feasibility of 100 percent impact investing. The findings indicate a significant increase in the depth and diversity of intermediary offerings (the top four reported are: impact strategy advice, impact policy development, asset management and due diligence services). Despite challenges, the survey responses indicate growth in the sector.
Signals of a bright future for impact
There is a growing market of specialized impact advisors globally (in our study, 43 percent of the respondents had a 100 percent focus on impact) and investors are clamoring for more. With 100 percent of the intermediaries expecting to see their business grow due to client demand, 32 percent state they expect a “significant increase” and are innovating and broadening their offerings.
There’s indication that client demographics signal a future upsurge of investors seeking impact advice. While millennials represent only 22 percent of the respondents’ clientele, Ivo Knoepfel of onValues notes a rise in millennial interest. “For the first time, 25- and 35-year-olds are approaching us here in Europe. They seem quite at ease in asking for independent advice. We see the clientele expanding – not just at the ultra high net worth level but also smaller private banking clients.” Alena Meeker of Merrill Lynch confirms that “our firm has done research that points to the fact that millennials and women in particular are asking for impact more and more.”
Challenges and Opportunities
Survey respondents revealed that while there are challenges, none are deemed to be insurmountable. An example of a challenge cited by Brent Kessel (Abacus Wealth Partners) is “balancing the need for liquidity and safety with the desire to put more of the balance sheet into private equity for the greatest impact.” This group of advisors is busy innovating to solve these challenges.
In the difficult area of impact measurement, for example, Clara Barby (Bridges Fund Management) is the lead facilitator of the Impact Management Project, and R. Paul Herman (HIP Investor) is combining forces with Michael Van Patten to build an online platform to match retail investor personal values and measurable impact goals with investments. Impact measurement innovations currently being developed by advisors will play a key role in the adoption of more transparent and reliable measurement practices across the board. So impact-savvy advisors like these are doing more than serving their clients – they are building the field.
Tools for an Impact Conversation
What if you find an impact advisor, but you’re not sure how to articulate the impact you want to have? Especially if you’re just starting out on your impact journey, it can feel difficult to effectively express your desired outcomes to your advisor.
To help investors frame their impact vision, we’ve created the Toniic SDG Impact Theme Framework that links the 17 UN Sustainable Development goals to 60 impact themes. Let’s say your primary interest is in clean energy. In the framework, we divide SDG 7 (“ensure access to affordable, reliable clean energy for all”) into three impact themes (Access to clean energy, transition from fossil to clean energy and energy efficiency) to reflect the different Theories of Change our members are working to achieve a clean and abundant energy future.
We created the framework to connect members to others working on the same theme and to investment opportunities, but it is now being used in many other contexts. One of those is as a framework for having a conversation with an advisor (or within your family) about your values and areas of interest. Getting more specific than “clean energy” helps turn the intention into action. This simple framework can be a powerful tool to help facilitate the conversation between investors and advisors, helping make sure they’re aligned to invest capital with maximum positive impact for people and the planet. Before you know it, you’re on your way to turning your passion for clean energy into a strategic list of impact themes for your investment portfolio.
Virtuous Cycle of Impact
It’s exciting to see not only the practical tools and products available now, but the joy that comes from using them. Words like “empowerment” and “fun” during interviews with the advisors reveal that the act of helping a client move into impact is having a positive effect on the intermediaries. “It’s a virtuous cycle of impact,” says Kristin Siegel, who manages the T100 Project for Toniic. “We hope that this report will activate and inspire not just investors, but the financial services industry, to default to making investment choices with impact in mind.”
We see evidence of this already. When non-members ask us how to begin to find an impact advisor, we point them to the report. And the area of impact management, in which advisors are key, is gaining traction. As an example, we saw huge demand for a webinar we just conducted with Confluence Philanthropy and The GIIN on innovations in impact management.
As one advisor concluded, “It is all about moving past the noise in the system to get to the more important task of co-creating the long-term plan for our planet.”