Understanding affluent working-age professionals’ perceptions of impact investing
High net-worth individuals and accredited investors are not the only players to consider when it comes to impact investing. People with net worth greater than US$1M may well be interested in putting some of their money to work for good, but I argue that a growing population of young professionals — both millennials and Gen-Xers — who have net worth <US$1M are increasingly interested in finding ways to align their investments with their values and to do so sustainably. This sixth impact investing practice View Point* presents revealing survey data I collected that demonstrate this trend.
About a year ago I conducted an anonymous survey using LinkedIn and SurveyMonkey asking people in my network about their investment and charity perceptions and activities. Recently, I began analyzing the approximately 200 responses I collected. To obtain a more focused view, I decided to address a particular subset of the population of respondents: the young, working-age, and affluent. Filtering for these self-reported demographic characteristics yielded 86 respondents between the ages of 30 and 39 earning >US$150K in annual income. Respondents came from across the world, but the genders were unevenly represented (Figure 1). While this sample may not be ideal for every purpose, it provided several useful insights into this group’s perceptions of impact investing.
Insight #1: Young working professionals invest more than they give to charity.
Most of this group of young, affluent, working-age professionals both give to charity and make personal investments, but they do more of the latter (Figure 2). Most invest more than 10 percent of their income in mutual funds (both equity and fixed income), trade equities, treasuries, and real estate. But while most respondents also make charitable donations, the amounts are typically less than 5 percent of their annual incomes. The most popular charities are, predictably, international NGOs and the schools or universities the donor attended. Surprisingly, 21 percent of those who gave less than 5 percent of their incomes to charity gave that amount to individuals in need.
Insight #2: Most respondents would like to add impact investments to their portfolio within next five years.
While at the time of the survey only a single respondent currently had an impact investment fund in his/her investment portfolio, almost a quarter of the 86 respondents indicated they would consider adding such an allocation in the coming year, and more than 60 percent said they would consider adding one in the coming five years (Figure 3). When considering actual expected investments, 17 percent of the same respondents indicated that in five years they would have an impact investment fund in their portfolios. This would represent the highest growth area for these investors, following only real estate and direct investment (both equity and personal loans). Further, 28 percent of the survey respondents under 30 years of age indicated they would have impact investments in their portfolio within five years.
Insight #3: Most respondents considered impact investing a viable investment strategy.
Respondents asked about their level of agreement with various statements about impact investing yielded strong messages (Figure 4). Almost half indicated either agreement or complete agreement that values are an important part of investment decisions and that impact investing is a viable investment strategy. Fully 83 percent agreed or completely agreed that not all important social or environmental metrics can be properly measured through financial indicators, and roughly half disagreed that the only metric useful in determining value creation is financial return.
Insight #4: Education, health, agriculture, and renewable energy are the most popular investment themes.
Respondents indicated interest or high interest in all 15 common impact investing themes surveyed. Of the 15 listed, the most popular were education, healthcare/wellness, renewable energy, and agriculture/food. This is not surprising because, in my experience, almost all individuals expressing interest in impact investing cite education and healthcare as key motivators. These individuals want to improve the quantity and quality of these services, and they see private investment as an effective and efficient way to do it.
Insight #5: Many potential impact investors lack knowledge of the large number of organizations in this area.
Among the 25 impact investment organizations mentioned in the survey, only one (Acumen) was known by more than half of the 86 respondents (Figure 6). The five best known to respondents were Acumen, LeapFrog, Root Capital, Bridges Ventures, and Accion. Interestingly, these five organizations differ widely. They offer different types of capital, focus on different sectors, and provide different ticket sizes. A quick LinkedIn search shows that, among the 25 organizations in the survey, these five have the most followers. In fact, a high and significant correlation emerged between respondents’ knowledge of an organization and that organization’s number of LinkedIn followers. However, interestingly almost none of them offer investment platforms for non-accredited investors. To my knowledge of the organizations mentioned in the survey, only Calvert Foundation, ResponsAbility and Oiko Credit offer any sort of retail product which would allow individuals with net worth <$US1M to invest in their funds.
These insights suggest that many impact investment organizations have room to grow. Potential benefit lies in looking for capital beyond the pool of traditional impact investors and seeking support from young, affluent, working-age professionals.
* The views represented in this series are the author’s alone.