Impact Investing Hits Mainstream, Faces New Dangers

Impact investing has “gone mainstream” with global banks entering the space, but experts are concerned they could damage the brand, the Australian Impact Investment Summit heard.

Author of The Impact Investor, Jed Emerson, said socially responsible investments and impact investing together grew 76 per cent from 2012 to 2014. One in six dollars dollars (USD6.5 trillion) is now invested with social and environmental considerations.

“This is all going mainstream in a really big way, and what I mean by that, you know Goldman Sachs just acquired Imprint Capital, which is one of the leading impact investing advisory groups in the United States,” Emerson said.

“BlackRock just rolled out an impact platform. Right now if you google ‘impact.com’ you get taken to BlackRock’s website.”

Emerson said that some of the major financial institutions could be engaging in impact investment to placate shareholders.

“We’re talking about risk mitigation. A lot of folks are doing this not because [they] want to do good, but because [they] want to do well,” he said.

“And that conversation is right next to the conversation about how to use capital to create social and environmental impact.”

Happy to have mainstream players in the game as long as they play transparently @BlendedValue #ImpactInvestSummit pic.twitter.com/T1pOtz7LYb

— Social Outcomes (@Social_Outcomes) October 19, 2015

However, he also said there are huge benefits of impact investing becoming mainstream, provided there is transparency.

“I think it’s great that BlackRock has come into this conversation, and I want to see what’s under the hood, the products that they introduce. I want to understand how are they defining impact and how well are they communicating that as part of their marketing material,” he said.

“They have an ability to access levels of capital… that I certainly don’t have. So I’m more than happy to have them in the game, as long as they play as transparent actors.”

CEO of Toniic, Stephanie Cohn Rupp, disagreed that impact investment is now mainstream. She told Pro Bono Australia News that she wouldn’t consider it mainstream until investment opportunities are democratised.

“I don’t think it’s gone mainstream yet, because for me mainstream means retail products, it means everyone can invest anywhere in the world… even if you're not a very wealthy person, and right now it's not true,” Cohn Rupp said

“Your average John Smith in Melbourne or in New Jersey, not the High Net Worth Individuals, not the foundations, not the large institutions, they mostly don’t have access to product.”

She does agree, however, that large institutions have entered the space due to increased demand of impact investment opportunities.

“On one hand it is amazing to have big financial institutions acknowledge that impact investing is a global trend and you need to build products,” she said.

“It comes from a pressure, honestly, at least on the banking side from the large global banks like Morgan Stanley or JPMorgan or Goldman Sachs, to have a wealth management group.

“The High Net Worth or Ultra-High Net Worth clientele is asking for product, saying ‘we want to do impact investing, what do you have on your platform’, and often times ‘nothing’.

“Citigroup has had that issue for years as well, so there’s that real fear of loss of clientele, so as a result the banks are trying to place new products on their platform that exist, or create new products. I’m not surprised bigger institutions are trying to build those products.”

.@stephcohnrupp says #Impinvest not just how we use our pocketbooks; it's very personal, very powerful. #ImpactInvestSummit

— Small Giants (@SGAust) October 18, 2015

Cohn Rupp said she is concerned that the global banks lack skilled people from the impact investment field.

“The issue though is the professionals that I have met who work on those issues in these big institutions do not come from the impact investing space, and may not do the research, or they have a view that it’s below market-rate returns,” she said.

“That’s my big fear – is it the right human capital behind it, is it the right teams, is it the right professionals, do they really do their research?

“And the truth is, thus far I haven’t really been impressed.”  

She also said she has seen greenwashing from some of the global banks, “just leveraging pages in the Financial Times or the Economist”.

“I’ve seen those ads already… the big sponsorships at SoCap or conferences in general, [by] BlackRock and these big financial institutions,” she said.

“If you really look at the dollars it’s minimal… for me that’s greenwashing. I would not say that the brand of impact investing equates to BlackRock, that’s just a fallacy.”

Cohn Rupp said the danger would be if the global banks diminished the true value of impact investing.  

“The goodwill that exists in our sector today, where people do want to move capital to change the world for the better, that goodwill be leveraged for products that aren’t focussed on mission,” she said.

“The risk is diluting that drive for mission and just being satisfied that this generally is sustainable or this generally is do-no-harm and therefore an impact investment.

“My fear is that these will be equated to really high impact products, and they be labelled exactly the same when they’re not.”

The inaugural  Impact Investment Summit in Sydney was hosted by Impact Investing Australia which brought international keynote speakers and Australian experts together.