You know it and we know it, Impact Investing is on the rise but….why? Speaking in a general sense the popularity of anything in life fades pretty erratically. Now with the colossal amount of media influencers, financial gurus, and other random strangers shouting at you, it’s hard to pick one thing and stick to it. Granted, investing strategies aren’t as easy to pick up and put down as your favorite tie-dye t-shirt, but there has been a noticeable surge in the number of people flocking to impact investing.
Generational (and other) factors
You’re probably asking yourself who specifically is sprinting to catch the impact investing train, and while we won’t throw a blanket statement over our audience, we think it’s safe to say that the majority of impact investors have been young and predominantly they are women. When we say young we’re talking mid millennial and lower, so about 18-28. However, that doesn’t mean other generations are turning a blind eye to this new investment strategy. In a study conducted by TDAmeritrade, they found that 33% of Gen X’s and 25% Baby Boomers expressed an interest in sustainable investments, which is great! But, when you compare it to the 43% that came from millennials, it’s clear to see where the generational gap lies.
Now, when it comes to dividing this new audience in terms of biological sex (because gender is something completely different) Morgan Stanley conducted a survey that provided us all with some compelling information. Their study found that of those who were interested in some type of sustainable investing (impact investing, SRI, ESG, etc.) 84% of women said yes, while only 67% of men claimed to be interested.
So now that we have a vague idea of who’s keeping us in business, let’s dive into some of the motivations behind why impact investing peaks their interest.
Karma points
That’s my simple answer for the very complex fact that people like to know something they are doing is benefiting the greater good and if that means they don’t have to actively do anything other than open an investment account (which already comes with benefits to the owner) the deal sounds pretty sweet. Spoiler alert, it actually is an incredibly sweet deal. Aside from using impact investing to increase your Good Place points, it also serves a deeply meaningful purpose that resonates with a lot of passionate clients.
“Many investors have and will continue to turn to impact investing to contribute to social and environmental solutions,” Amit Bouri, CEO of the GIIN, said in a statement.”
Social change, and being a warrior of it, is a defining vein in today’s history. More and more we see younger generations wanting to make their mark and fix the issues they see in their everyday life. For example, some are starting non-profit organizations to improve social issues. The Buddy Project is an organization that serves as mental health support and advocates for those struggling with mental health disorders and their CEO and Founder Gabby Frost is only twenty-three.
Others are more politically drawn and are taking the steps necessary to be a part of their local governments, volunteer to work elections, and study to one day take their place on capitol hill. Serving as a wonderful example of this motivation in action is Alexandria Ocasio-Cortez, popularly known as AOC, who took office at only 29 making her the youngest woman to ever serve in US Congress.
And finally let’s not forget about the social activists, marching for causes they feel are unjust. From the Women’s March back in 2017 to the countless protests in connection to the BlackLivesMatter movement, it’s clear that our younger generations are no longer content with being complacent in the midst of injustice. Impact Investing simply provides them another platform to advocate with.
The returns
This one might seem obvious, but it’s important to note. Some people might be willing to receive a little less if it means their actions would have a greater impact, but when it comes to money that number gets astonishingly smaller. Guess it’s a good thing that impact investors don’t have to sacrifice returns.
“In terms of financial performance, 88% of respondents reported meeting or exceeding their financial expectations, GIIN reported. Meanwhile, 99% of respondents said they met or exceeded expectations since inception.”
We wrote a whole other post explaining why you don’t have to worry about losing money when you opt for an impact investment strategy over a traditional investment plan, so we won’t bore you with all of the details. The important thing to realize is that this is one less thing new investors have to worry about and therefore one more item on the good side of their pros and cons list.
Final thoughts
Impact Investing is the all you can eat buffet of investing strategies. It tells you that you can have everything you want, sacrifice nothing, and do it all at the same time with the same account. While we aren’t hating on the investors who prefer a more rigid 5-course meal kind of investment strategy, we believe that flexibility and options only make the investing experience better. At Invested Interests, we offer three main portfolios to cover the three biggest areas of change that impact investing targets. However, if there is a cause that you value that correlates to a financial fund, we aren’t opposed to customizing our plans to align with what means the most to you. So hey, no pressure from us, but if you feel like hopping on this trendy bandwagon we want to be the ones to help you get there. Connect with us today to schedule your initial conversation with a member of our team and learn how impact investing can help you reach your financial goals.
