The Impact of Social Investing
EisnerAmper recently held its second San Francisco Personal Wealth Forum at the Omni Hotel in the financial district. At the event, Dan Heller, a partner in the Private Business Services and Personal Wealth Advisory Group, moderated a panel on social investing that featured Timothy Freundlich, president of Impact Assets, and Nicole Systrom, director of philanthropic partnerships at Prime Coalition.
Dan started off by defining sustainable/social/impact investing, which can mean a lot of different things (and has a lot of different names). Simply put, social investing is investing responsibly in a way that does not negatively impact society or the environment. Going a step further, social responsibly investing can mean investing in companies with the best practices for environmental, social, and governance practices. Social investing has become so rampant in the investment arena that it now transcends investment classes -- Tim described it more as a lens to look through than a specific class. He stated that these days 1 in 5 investment dollars are considered to be invested in social investing vehicles. Dan added that these funds also seem to be performing better than the average stock. Barron’s released their second annual survey recently which evaluated the 203 sustainable funds with assets exceeding $300 million. When comparing the returns for 12 months ended September 30, they found that 37% of those funds outperformed the S&P 500. These types of investments are also helping bridge the gap of generations in wealthy families where the older generations are looking for a way to get the up-and-coming generations engaged and involved in keeping the family fortune thriving. Nicole said that it seems to be mostly the millennials that are searching out these kinds of investments and they seem to be exceling with this new investment tool. Tim agreed and added that this is a great way to get the millennials to take charge and go forward, taking the lead in making portfolio management decisions. He also added that 92% of millennials fully believe you should integrate values into investment-making decisions. Overall, the consensus on the panel is that social investing has come into the mainstream as an investment option and it’s not going anywhere; in fact it’s grown exponentially in recent years. In 2011 there was $3.0 trillion in sustainable investing in the U.S. and by 2016 that number had grown to $8.7 trillion. With the younger generations coming up into an age where they will be making the major investment decisions there has been a shift in power. This is a type of investing that should be on everyone’s radar because not only will it bridge the generation gap and bring families together, but could provide a return on investment while doing so.