Publications

- March 1, 2021: Vol. 8, Number 3

Roundtable: What are the hottest categories in impact investing and why?

by contributing executives

Eric Paul, president, Four Springs Capital Markets

Impact investing has grown in popularity because a growing segment of the population wants the companies with whom they work to reflect their individual values. It will be interesting to see over time, as people’s life experiences and perspectives change, if their investment philosophies adapt as well. Topics like social justice, environmental sustainability and financial inclusion are top of mind because of passionate citizens, current events and the network effect of social media. If performance in impact investing is strong, it’s a win-win. If returns lag, it will be fascinating to observe whether performance or values win out. Nothing appears hotter at this time than the democratization of finance, which I count as one of the most important developments in recent years. We’ve all seen the impact Robinhood has had on stock trading. Things such as microfinance loans, crowdsourced equity and other platforms should have equal resonance moving forward.

 

Jennifer Ayer, managing director and co-lead of impact investing, Tiedemann Advisors

Impact investors increasingly view real estate at the intersection of environmental sustainability and equity and inclusion. Real estate is a path to wealth for some, but barriers to entry have widened the wealth gap for many. Impact investing examines the role of housing in community health — did prior investing models isolate residents and miss opportunities to do more? Whether through mixed-use real estate near commercial hubs and transportation, or proximity to education and healthcare, impact investors are exploring ways to create a more cohesive, self-directed community of residents.

 

David Sher, co-CEO, Greenbacker Capital

Impact investing strategies to address climate change in a warming planet is probably (excuse the pun) the hottest category. The reason for this is relatively straightforward. Most people believe that climate change has become a crisis and that failure to address the problem head-on has already led to catastrophic changes in our weather — more severe storms, drought, forest fires, etc. Investment strategies that focus on companies or activities that replace carbon-emitting processes with low carbon solutions is, therefore, in high demand. One example is renewable energy investment, which has gone from the fringes of the energy market to the fastest-growing segment in the power sector.

 

Rajeev Kotyan principal, Innovative Advisory Group

While we know we can invest in real estate within our retirement accounts, whether they be IRA or 401(k), there is the caveat that one cannot make personal use of the property while it is held with our retirement account. But planning an acquisition of our retirement home that we can move into along the oceanside or elsewhere can be done at a young age, while renting it out and earning returns until we move in at retirement. At retirement age we look to distribute this home into our name and begin using it personally. While many a planner may ask the question, so what about survival funds, what are you going to be living on, if and when you take such a distribution? This is a valid question, but appropriate impact planning and investing, should allow for diversification within your retirement accounts, as well as outside of your retirement account, some of which would come from the sale or rental of the property that you lived in prior to your retirement.

 

Alex Anderson, director, Time Equities

As impact investors seek to balance positive social and environmental impacts with financial returns, the clean energy sector is the most empowering option. With fossil fuels rapidly depleting and a zero-carbon economy rising, investing in renewable energy resources such as solar, wind and biofuel makes more sense than ever before. Clean energy, clean transportation and energy efficiency are positioned to grow and, with federal support, are expected be a big part of rebuilding our economy in the years to come. Investments in these industries can spur significant job growth, tackle climate change, and address health and equity challenges.

 

Daniel Catone, founder and CEO, Golden State Wealth Management

Products can help a person feel happier, beautiful or smart, often based upon slick marketing. Product marketing can help a person feel like they are making the world better, even if they do not really improve anything. We see companies regularly position themselves as “socially responsible.” This is where emergent asset managers are helping clients sort the phonies from the authentically responsible businesses. Over the next few years, there will be an explosion of the number of asset managers who will help investors discriminate between companies who pay lip service to responsibility and companies genuinely trying to improve our world.

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