Calvert Foundation: New Research Shows $650 billion Potential for Sustainable and Impact Investing
Thursday, June 7, 2012
Calvert Foundation launches “Gateways to Impact” report that indicates 72% of financial advisors express interest in offering this opportunity to clients
Bethesda, MD – June 6, 2012 – Calvert Foundation is pleased to announce the launch of a new report showing that an overwhelming majority of financial advisors believe that sustainable and impact investments represent an opportunity to grow their practice. These advisors are willing to recommend sustainable investments to roughly one-third of their clients and would allocate 10 – 20% of those portfolios to these products, which means that on average U.S. advisors are willing to place 2.5% of their total assets under management in sustainable investments for a market potential of $650 billion.
The report, “Gateways to Impact,” is based on a nationwide survey of 1,065 financial advisors currently managing client money. The report provides financial services firms with key insights into the demand among financial advisors for sustainable investment information and products. It offers an overview of financial advisors’ readiness to advise their clients on sustainable investments and recommends how wealth management and financial services firms can better support their advisors and clients in pursuing these investments.
Lisa Hall, President and CEO of Calvert Foundation, a project manager for the research, said, “People want to align their money with their values, and there is growing recognition on behalf of financial advisors that they need sustainable and impact investment products to offer their clients. This report shows that the firms that succeed in this market will be first to give their advisors the tools and education they need to effectively advise their clients on sustainable investment opportunities.”
Thirty-eight percent of financial advisors express strong interest in recommending sustainable investments to their clients; 72% express some interest. The advisors who express strongest interest in advising their clients on sustainable investment strategies tend to be female, have advanced certifications, are affiliated with national registered investment advisor (RIA) firms, have average client assets under management (AUM) between $1 million to $10 million, and have less than 10 years of tenure as advisors.
William Crager, President of Envestnet, Inc., one of the study’s sponsors, said, “Sustainability is no fad. In fact, it has become an essential part of business performance and competitiveness. The business world is changing. The need for efficiency feeds innovation in sustainable practices that are designed to lower costs and protect future supply and distribution chains. This study shows that advisors can lead by learning about sustainable investing and sharing that information with their clients.”
The study identified factors that will enable advisors to increase their sustainable investment advisory. The leading factors are evidence of financial performance (54% of advisors cite as a need), client demand (44%), and longer track records (39%).
Financial services firms can help their advisors serve clients more effectively by providing advisors with guidance on how to build their expertise in sustainable investing and the available products at their firm.
Advisor interest was tested using descriptions of eight sustainable investment products. The highest levels of interest were in more traditional products that are already familiar to advisors – U.S. Large Cap Equity Fund with ESG focus (61% of advisors interested; ESG means environmental, social, and governance considerations are factored into company analysis), U.S. Corporate Bond Fund with ESG focus (53%), and Global Equity Fund with Sustainability Focus (51%). The research also found that a significant number of advisors (23%) believe that “impact investments” – or direct investments in community development, microfinance, and other social enterprises that usually take the form of private debt or equity – are appropriate for many or all of their clients.
Bruce M. Kahn, Ph.D., Senior Investment Analyst at Deutsche Asset Management, one of the study’s sponsors said, “As investment managers we recognize the challenge of helping clients find the right balance between financial return and environmental and social impact. The findings of this survey underscores our belief at Deutsche Asset Management that sustainable and impact investing is a critical component of fiduciary responsibility. More education to the investment community, including financial advisors is imperative to understand the value of making sustainable investments more accessible to clients.
“The Rockefeller Foundation is proud to support this critical research as part of our effort to accelerate the development of an impact investing industry,” said Judith Rodin, President, The Rockefeller Foundation. “Since we launched our impact investing initiative in 2008, we have seen the excitement for marrying financial return with social and environmental impact only grow. We continue to be increasingly buoyed by findings like those being released today – highlighting a positive response from the Finance Advisory Community, which is so critical to unlocking greater capital for impact.”
About Gateways to Impact
Gateways to Impact is a report based on survey-based research and analysis conducted and led by the Calvert Foundation and Hope Consulting, to better understand the sustainable and impact investment field from the perspective of financial advisors. This report was supported by The Rockefeller Foundation, Calvert Foundation, Deutsche Bank, Envestnet, Metanoia Fund, and Veris Wealth Partners. To learn more and download the report, go to www.gatewaystoimpact.org.