Stephen Distante, CEO of Vanderbilt Financial and Impact U, recently appeared as a panelist on Investment News’ Innovators in Investing video webcast series to be broadcast internationally later this month. He appeared on a panel with Jordan Farris of Nuveen and Dr. Abdur Niremi of Flexshares. The panel discussion focused on the evolution of impact investing, its opportunities and challenges, and how financial advisors can craft meaningful conversations with their clients about all these ideas.
Financial advisors who want to make a difference with their practice are often perplexed by how to invest sustainably and responsibly for their clients without sacrificing return. As the panel confirmed, the answer for these advisors is impact investing.
Impact investing is not some pipe dream, or a Peter Panish reverie that only the elite advisors who handle ultra-wealthy clients can afford to entertain. With over 8 trillion in assets invested, it is a massive trend in the marketplace, one with political underpinnings that are only growing. The panelists cited numerous examples of how companies with socially responsible business practices may tend to exhibit lower risk over time, thus offering an attractive risk-reward profile.
Advisors can have the practice they’ve always dream of, one that is designed to do social good. Distante suggests advisors begin the discussion with clients and prospects by asking what is important to them and what ideals they value in their investments, and then following up with stories that describe how these goals may be achieved using stories about socially conscious investment choices.
The New Model for Sustainable Investing
The idea of investing in a socially conscious way isn’t a new one. Socially responsible investing came first, with its aim to prevent investments in offensive companies such as tobacco or gaming businesses. The UN’s Sustainable Development Goals, a set of 17 noble objectives for solving the world’s problems, are breaking into the scene and will likely become the eminent standard guiding the industry in years to come. ESG (Environmental, Social, and Governance) Investing has joined SRI and the SDGs as a set of guiding principles.
These ideologies, though in existence for many years prior, became popular after the recession as lack of social responsibility was commonly believed to be the reason for the systemic collapse of the global economy. This resulted in massive unemployment for the Millennial generation, fueling the Occupy Movement and anti-corporate sentiment that precipitated the rise of investment frameworks that take ethics and social good into account.
But in the world of today, the question isn’t whether or not impact investing is something the public wants. Given the choice, most people would elect for a socially conscious investment over one that did not demonstrate these benefits.
Despite the desire the public is expressing, there doesn’t seem to be enough opportunity for capital to flow into investments that people feel will reward them. Traditionally for wealthy investors to participate in Impactful investments, they would direct capital into private companies that made a difference. The world of today has brought many more options to the forefront. Investors can now choose from a lineup of sustainably-focused mutual funds, ETF’s, variable annuities, and private equity transactions in addition to equities and bonds. As a result, sustainable investments have the ability to make up a higher percentage of the total portfolio than seen in years past.
Vanderbilt Financial Group is a sustainable broker-dealer. We are replacing the independent broker dealer model and elevating the level of social responsibility within the financial services industry by helping people invest their money in a way that is congruent with their values and passions.
Investment News’ Innovators in Investing video webcast series will be broadcast on November 28th at 4 PM.
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