Bay Area’s impact investing sheds light on larger industry
Investing in an organization or fund with the aim of generating social or environmental impact alongside a financial return – it’s a concept that has been gaining wider appeal and attention in wealth management.
Often known as impact investing, the concept has actually become an industry. In fact, the Global Impact Investing Network (GIIN) estimates impact investments totaled $60 billion in invested capital in 2015.
Family Wealth Advisors, part of Bank of the West’s Wealth Management Group, recently partnered with the Bay Area Council Economic Institute (BACEI) to look more in-depth at impact investing activity in the San Francisco Bay Area, and I think insights from the report have broader relevance worth highlighting.
In general, the targets for much of impact investing fall into three general groupings, according to the report:1. Creating social value through new products or services. This may be the most common, as investors focus on an objective such as sustainable agriculture and food systems, access to low-cost health services or safe drinking water, or clean energy. Living Goods, founded by Chuck Slaughter to bring simple health treatments to the people of Africa, would be a fine example of this activity. (Learn more in this video.)
2. Generating new employment opportunities for disadvantaged populations. Some microfinance projects are a good example of this.
3. Investing in specific geographies. Many investors may look to grow firms in economically disadvantaged countries, or invest in real assets, such as housing.
These three areas give a good framework for understanding the types of investments that make up this industry – not only in the Bay Area but across the United States. I encourage you to read the full report here.
As the BACEI paper notes, impact investing is a kind of “investment vehicle in evolution.” As it continues to take shape, I am eager to explore it further on this blog as a possible choice for many ultra high net worth individuals.
For further reading, I recommend my colleague Julie Shafer’s blog post on 5 steps to becoming a more strategic philanthropist as another great resource for those who may consider similar targets for their philanthropic giving.
Bank of the West, its affiliates and subsidiaries, are separate from and unaffiliated with the Bay Area Council Economic Institute.