This morning, I went to a panel presentation on impact investing, and it was actually the fourth such panel put on by the financial services community I have been to over the last few months.  Given the obvious popularity of the topic, it is clear there is interest and a yearning from financial service providers to learn more about impact investing. Frankly, it is exciting to have the force of this community interested and engaged in something so close to the social sector.

However, I have noticed at all these impact investing events, that the panelists, who are mostly financial services providers, have very articulately spoken about the opportunity impact investing provides from a financial perspective and the potential for monetary return, but have said very little about the social impact.  Undoubtedly, the social sector needs people like this that can quantify and integrate impact investing into the language of finance, but, as I have written in a previous blog, there are two goals to impact investing: financial return AND social return.  The financial services industry needs to be able to speak about both these goals and the potential opportunities to fulfill these goals.

On the financial return side, the evidence is fairly compelling, you can still earn a market or slightly below market return, depending on the investor’s goals from impact investing. Do a quick google search and a plethora of evidence pops up to support this claim. Rockefeller Foundation and JP Morgan have summarized much of this evidence in their report Impact Investments: An emerging asset class. Talking about this kind of return is a financial adviser’s bread and butter, so hopefully that piece should be covered.   Social impact is far harder to talk about as evidenced by the panels I have attended, but I would argue that the social return is actually the more compelling argument for impact investing. Social impact represents what is new and different about this asset class, and it is why clients want to do it.  Clients are interested in impact investing because they is an opportunity to have an impact on society alongside a financial return.  This means that financial advisers must also be talking about the social return.

Talking about social return is really challenging as an adviser, social impact is seldom an expertise and rarely is training is provided around the concept.  In addition, measurement of social impact is in its infancy so how can advisers talk about something that isn’t really quantifiable?  Well, even without these tools it is possible to have something to say about social impact that can get clients excited. Advisers don’t need to be experts in social impact but they do probably need an elevator pitch around why it is a compelling opportunity. Here are a few suggestions for advisers who want to be able to speak about the social impact side of impact investing.

  • Have one example or story about the social impact you have seen or heard about from your work in the space or research you have done. Tell the story convincingly and explain that the story represents the type of opportunity that impact investing can offer
  • Consider the broader opportunity: Harnessing the power of the capital markets to create social change represents an unprecedented opportunity. Social issues represent a continual fiscal burden to governments whose revenues are declining while philanthropic organizations have limited resources and cannot solve social issues alone. Impact investing offers a scaleable opportunity to creatively fund projects that may otherwise go unfunded, and help scale viable business models that meet pressing social challenges.
  • Make impact investing personal to a client by relating it to other philanthropic work a client might be involved with. For example, if you know that a client is interested in an involved in climate change then you could point out that impact investing might support their philanthropic goals around climate change.  Ask them how they think impact investing could support those goals.
  • Admit that social impact measurement and quantifying social return is in its infancy but that there have been strides to do this kind of work. Point them towards the emerging attempts (e.g., GIIN and Rockefeller Foundation) to quantify social impact return.

Financial advisers do not need to be experts in social impact, but they also can’t ignore this side of impact investing—it is too important to clients.  Hopefully these suggestions provide a starting point for discussion with clients and a basis to create an elevator pitch on the social impact of impact investing.