Social Impact Investing

I have been spending a lot of time reading about and thinking about social impact. Social impact is defined as the effect of an activity on the social fabric of the community and well being of the individuals and families. Given my asset management background, I am particularly intrigued by social impact investing and this growing and evolving investment opportunity.

I came across a report from Hope Consulting called Money For Good. The report identifies the US market opportunity for impact investments and charitable gifts for individuals. The report also looks at what for- and nonprofit organizations can do to tap into the market.

One of the Money For Good Project's main goals was to create a voice for donors. In their words, "The goal of this project was to understand US consumer preferences, behaviors, and demand for impact investment products and charitable giving opportunities (together, these make up the “money for good” market), and then to generate ideas for how for- and nonprofit organizations can use this information to drive more dollars to organizations generating social good."

The 100-page report is a good read, but I have summarized the findings and recommendations for institutions targeting these donors/investors interested in social impact investing.

Key Findings:
- Most individuals are open to impact investing, but need to know more.
- There is $120B of market opportunity, half of which is for smaller (<$25k) investments; even the wealthy want small investments.
- The opportunity is greater when positioned as investments, not alternatives to charity.
- Once people get involved, their willingness to invest increases (ramp in effect)
- People discover & transact through their advisor.
- The key barriers investors see relate to the immaturity of the market, not the social or financial qualities of the investment opportunities.
- Overall, downside risk is more important than upside financial returns.

Recommendations for Institutions:
- Segment on behaviors, not demographics.
- Tag and track your donors by segment.
- Determine what segments are best for your organization, given your strengths.
- Develop consistent outbound marketing that appeals to target segments.
- Prioritize investments based on what will drive donor behavior.
- Capture donors early.
- Understand how to manage different segments when approached.

This is an immature market. Like so many different approaches to investing and gifting, an inexperienced donor can struggle with figuring out where to start and how to go about finding the right opportunity. From my readings and conversations the tough part is getting the right level of information into the hands of these donors/invesors and then cultivating the decision process in such a way that gives comfort and satisfaction.