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40% of investors plan to make their first impact investment in the coming year
Investors look to financial advisors to close the knowledge gap
BOSTON, April 20, 2022 – Impact investing is poised to become a mainstream practice, according to a new study from Fidelity Charitable, an independent nonprofit and the nation’s largest grantmaker. Combining their increasing share of wealth with their generation’s heightened focus on social change, 61% of Millennial investors say they currently participate in impact investing.
In addition to the personal fulfillment that comes with aligning their investments with their values, Millennials also believe in impact investing’s real power to do good. A total of 62% believe the practice has greater potential than traditional forms of philanthropy to create long-term positive change. They also believe in the long-term financial viability of the strategy; two-thirds of Millennials say impact investing is a smart investment.
“We find that investors are increasingly interested in aligning their investments with their broader values and desire for social change,” said Scott Nance, vice president of impact investing at Fidelity Charitable. “And the trend toward values-based investing will only grow as Millennials come to control a larger share of wealth.”
Impact investing is the idea of using one’s investment choices to help achieve social benefits while also generating financial returns. Most commonly, it means investing in mutual funds, indexes, or individual publicly traded companies screened for particular criteria, such as environmental, social, or governance impact. This provides capital to address key challenges in sectors like sustainable agriculture, microfinance, and access to basic services like housing and healthcare.
Currently, only one-third of all investors engage in impact investing. However, 40% of non-participating investors will consider making their first impact investment in the coming year. And those who have tried it are looking to expand their holdings: 41% of current participants plan to increase the amount they allocate to impact investments. And almost none expect to decrease their holdings.
The most common barrier to participation: lack of knowledge, cited by 39% of those who have not yet participated. In addition, 31% of this group said they would turn to their financial advisor to help them close that gap and make impact investments successfully.
Already, financial advisors have been key players in moving impact investing into the mainstream: 42% of current impact investors learned about it from their financial advisor and 30% from materials by an investment firm.
At Fidelity Charitable, donors are able to combine impact investing with their philanthropy through their donor-advised fund, called a Giving Account. This gives donors triple-impact power: First, donors can potentially minimize their tax burden by donating appreciated securities while providing an even larger initial gift to charity. Second, donors can recommend these funds to be invested in any of Fidelity Charitable’s five impact investing pools. Third, that money then potentially grows and can be used for grant recommendations tax-free—creating an even larger gift for charity in the future.
The nonprofit is seeing a corresponding increase in interest: In 2021, Giving Account assets allocated to impact investments rose to $3 billion—a 67% increase from 2020. In alignment with this demand, Fidelity Charitable also launched its fifth impact pool in 2021.
Fidelity Charitable donor Laura Ewbank decided to allocate 100% of her Giving Account into Fidelity Charitable’s impact investing pools in 2021. An attorney and assistant general counsel at Microsoft, Ewbank is passionate about supporting charities such as Team Child, which provides legal support to children from under-resourced communities. After learning about impact investing from her financial advisor, Ewbank wanted to be certain that her investments were in alignment with her values.
“Increasingly, I’m trying to be more sophisticated in how I invest,” Ewbank said. “If you can both make smart investment decisions and support a cause you value at the same time, that seems like a no-brainer.”
For more information, view the full report: https://www.fidelitycharitable.org/insights/insights-into-impact-investing-for-2022-and-beyond.html
Methodology
The Fidelity Charitable report is based on a study conducted in July and August 2021 by Artemis Strategy Group, an independent research firm. The study examined impact investing and charitable giving among 1,216 investors in the U.S. who have a minimum of $25,000 in investable assets outside of an employer retirement plan.
About Fidelity Charitable
Fidelity Charitable is an independent public charity that has helped donors support more than 357,000 nonprofit organizations with over $61 billion in grants. Established in 1991, Fidelity Charitable launched the first national donor-advised fund program. The mission of the organization is to grow the American tradition of philanthropy by providing programs that make charitable giving accessible, simple, and effective. For more information about Fidelity Charitable, visit www.fidelitycharitable.org.
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