NB Financial Health

Saturday
April 11
2015

James Militzer

Weekly Roundup: Sympathy for the Super-Rich: They don’t care much about socially responsible investing – but are the rest of us any better?

As if the world needed another reason to get annoyed at the super-rich, this week saw the release of a survey that’s likely to irritate socially responsible investing (SRI) advocates.

Check out these stats, courtesy of new Spectrem research on affluent investors: among investors with a net worth of $5 – $25 million (not including their primary residence), only 20 percent said the social responsibility of investments was a factor in their investing decisions. And when asked to rate their interest in the social impact of investments on a 100-point scale, the average ultra-wealthy investor responded with a paltry 33.6. (“Merely” wealthy investors, with a net worth between $100,000 and $1 million, scored significantly higher.)

If you’re hoping for SRI to take the next step, you may be rolling your eyes at the obliviousness of these multi-millionaires to the social impact of their wealth. Don’t they understand – or care – what a difference they could be making? That was my initial reaction – until I remembered the email I received last January.

It was from my retirement fund manager, and they had some great news: they were offering a new “Social Choice Fund” that would allow me to shift my portfolio – both equity and bond funds – into investments that meet environmental, social and governance criteria. Best of all, as they were careful to say, choosing these new options would deliver improved social outcomes without sacrificing financial performance.

It sounded like a great deal – and one more bit of evidence that SRI is going mainstream. But then a month passed, and I hadn’t acted on the offer. Another month passed, and guilt set in. After the third month, I had largely put it out of my mind.

The funny thing is, I’m probably the ideal candidate for this kind of fund. I’d rate my interest in SRI at well over 90 – far more than those one-percenters whose indifference I looked down upon. Yet when it comes right down to it, I’m no more of a socially responsible investor than they are.

Why? Inertia is certainly an issue – it’s usually a chore to make and execute financial decisions. But the main obstacle is more significant: on some level I haven’t fully bought into the dual promise of social impact and competitive returns. I’m over 40, and like many Americans, I’m a bit behind on my retirement savings. So I’m far from confident that my IRA will hold up – even discounting the possibility of another stock market crash. My portfolio has been recovering well enough from the 2008 crisis that I’m reluctant to risk upsetting the status quo. And when the stakes involve the future security of myself and my family, even reassurances from my fund manager and positive results from multiple studies aren’t enough to overcome my doubts.

Understandable? Sure. Common? Probably. But though my experience likely highlights one reason for the still-limited embrace of SRI and impact investing among retail investors, this situation is improving each year. And the sector is advancing on other fronts as well, as shown by Acumen and LGT Venture Philanthropy’s announcement that J-PAL is conducting a randomized control trial on their co-investee, Husk Power Systems. With more data on social impact and a longer track record in generating competitive returns, perhaps even reluctant investors like me (and my millionaire counterparts) will finally put our investment dollars to better use.

In other investing news this week …

The Global Impact Investing Network (GIIN), in partnership with Dalberg Global Development Advisors, released The Landscape for Impact Investing in South Asia. Described as a “state of the market analysis of the impact investing industry in the region,” the report includes a chapter for each of the six countries studied—Bangladesh, India, Myanmar, Nepal, Pakistan and Sri Lanka. According to the GIIN, it’s the most comprehensive study of impact investment activity in South Asia ever done, in a region where development finance institutions and other investors have deployed around $9 billion in impact capital to date.

Meanwhile, in mobile money …

In a developing story with serious implications for the mobile money sector, it was reported this week that the Bank of Uganda is planning a major investigation into the country’s biggest telecom operator, MTN, after a blockbuster expose by The Independent last month. The crux of the story is the allegation (disputed by MTN) that MTN Mobile Money was deliberately over-drawing its e-money account to “create money” that wasn’t backed by actual deposits. This e-money, which at one point reportedly amounted to Shs 21 billion (over USD $7,000,000), was cashed out and used by MTN and its staff and agents, according to the allegations.

As MicroSave’s managing director Graham Wright put it, this case could have huge implications for digital finance worldwide. “If regulators lose faith in the ability of MNOs, banks or indeed their own audit departments to ensure that all e-money is fully backed by deposits in bank accounts, and thus that they cannot guarantee the integrity of the money supply, they are likely to react to the detriment of digital financial inclusion,” he wrote on MicroSave’s LinkedIn group. We’ll be watching the story carefully – along with the rest of the industry.

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James Militzer is the editor of NextBillion Financial Innovation.

Categories
Entrepreneurship, Impact Assessment, NextBillion Originals
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digital payments, Impact Assessment, impact investing, investment fund, mobile finance, mobile money, Weekly Roundup