Guest commentary: Consider impact investing to make more of a statement
By Tom Washing
Over the past fifteen years, a new investment class has emerged, and its momentum is accelerating — impact investing.
Impact investing comprises investments made to generate social impact as well as realistic financial returns.
Examples include companies whose products or services address today’s most unrelenting challenges in healthcare, the environment, climate change, income inequality, and sustainability.
Studies have shown that impact investment funds actually outperform most normal fund categories.
And the folks with money to invest have taken notice.
The current impact investment market worldwide is estimated at a stunning one trillion dollars.
We are in the early stages of the greatest transfer of generational wealth in American history.
Baby Boomers, who were born between the end of World War II and 1964, are now aged sixty to seventy-eight.
The historic growth in the value of real estate and stocks since the end of the war has endowed this cohort with assets totaling $184 trillion. Between now and 2045, much of that will pass to Gen X and Millennials. Millennials as a group look to inherit $68 trillion from Baby Boomers and older Gen X parents — born between 1965 and 1980 — as early as 2030.
A remarkable 70% of these young people — as compared to just 21% of older folks — favor investing in sustainable investments.
Fidelity Charitable estimates that 62% percent of Millennial investors “feel that impact investing has greater potential than traditional philanthropy to create long-term positive change in the world.”
In other words, control of investment decisions at family offices, donor-advised funds and wealth management firms will be shifting to a generation who aim to see their money invested where it can make a measurable impact on improving the human condition.
Millennials, younger Gen Xers, and the oncoming Gen Z — the oldest of whom are now 27 — don’t want to just invest in impactful companies — they want to work for them.
An expansive 2022 survey by Deloitte Global found that “Gen Zs and Millennials are increasingly looking for purpose-driven work, where they are empowered to drive change — both within their organizations and in society. They want to work for organizations that are having a positive societal impact, and where they have an opportunity to get directly involved and make a difference through their work.”
Andreas Forsland is the founder and CEO of Santa Barbara-based Cognixion Corporation, a mission-driven company aiming to unlock speech for hundreds of millions of people worldwide affected by communication disabilities.
Andreas told me “We are able to attract and hire the most talented technologists because they believe in our mission and want to make a difference in the world.”
The same applies to non-profit organizations focusing on societal change at the local level.
Jackie Carrera, President and CEO of the Santa Barbara Foundation, has built a stellar management team devoted to improving the lives of local citizens through innovative grant and loan programs that generate a return through interest payments and similar income-generating devices.
These efforts have been particularly effective in support of affordable housing, a priority for the Foundation. Yes, non-profit endeavors can be attractive impact investments as well.
A local resource for information about impact investing is the Sustainable Change Alliance Foundation (SCA), a Santa Barbara-based non-profit that fosters investment in local companies working to enhance the well-being of people and the planet.
SCA’s board of directors and members include community leaders and executives with experience in impact investing, venture capital, medical devices, pharmaceuticals, ocean health, non-profits, and renewable energy.
SCA sponsors monthly programming events and periodic social gatherings bringing together thought leaders from local companies and non-profits seeking solutions to pressing issues in healthcare, the environment, climate change, and sustainability.
SCA regularly introduces impactful companies to its members.
It also collaborates with non-profits like its member/sponsors Cottage Health, Santa Barbara Foundation, and UCSB providing mentoring and educational guidance on impact investing.
Memberships are available for a nominal fee and members consider the SCA networking environment alone worth the price of admission.
Tom Washing is chairman of the board of directors of The Sustainable Change Alliance as well as a career venture capitalist and impact investor who resides in Santa Barbara.