Fidelity Charitable study finds impact investing at tipping point

BOSTON, June 12, 2018 —Over 70% of Millennials and Gen-Xers have made an impact investment versus just 30% of Baby Boomer and older investors, according to a study released today by Fidelity Charitable , an independent public charity and the nation’s second-largest grantmaker. Considering the increased investing power of these generations as they build their wealth, this generational gap suggests a massive influx of investors who will prioritize a mission-based approach. “Impact Investing: A Tipping Point?” explores the coming wave of investors who are seeking to align their values with their investments and are hungry for education.

Impact investing is the act of purposefully making investments that help achieve certain social and environmental benefits while generating financial returns. Fidelity Charitable donors have been representative of the trend, increasing donor-advised fund assets invested for impact to $856 million at the end of the first quarter in 2018, a 110% increase from the prior year. In response to this demand from donors, Fidelity Charitable also announced a broadening of its impact investment capabilities, including launching three new impact investing pools and the expansion of its recoverable grants program.

“Our donors are increasingly interested in impact investing and the ability to align their investments with their broad philanthropic goals,” said Pam Norley, president of Fidelity Charitable. “We strive to grow philanthropy by providing programs that make charitable giving accessible, simple and effective. In meeting that mission, we empower our donors to maximize the impact throughout the journey of their charitable support—from the moment they consider making a gift, through its investment and, finally, when it is granted out to a nonprofit.”

Generational Impact Investing by the Numbers

A large majority of affluent Millennial (77%) and Generation X donors (72%) indicated they had made some form of impact investment. This compares with just 30% of affluent donors from the Baby Boomer and older generations.

Investors were most interested in investing in public companies with good environmental or social practices, either by investing directly (58%), or through exchange-traded funds or mutual funds (56%). However, they also indicated a strong interest in investing in small business/ start-ups with strong social or environmental practices (48%), venture capital or private funds focused on this category (45%) and in making loans to charitable organizations (42%).

The study also found a strong correlation between a donor’s attitude toward charitable giving and the likelihood that they would make an impact investment. Seventy-nine percent of respondents in the study who rated charitable giving as “very important” to them also engaged in impact investing.

Fidelity Charitable Impact Investing Programs

Fidelity Charitable provides donors with several options to recommend impact investments within their Giving Account:

• New Impact Investing Pools
  The Sustainable U.S. Index Pool, the Sustainable International Index Pool and the Environmental Impact Access Pool expand the existing sustainable and impact investing lineup at Fidelity Charitable and are available to all Fidelity Charitable donors, regardless of Giving Account balance. Fidelity Charitable launched its first sustainable investing pool in 2015.
• A Recoverable Grant to a Nonprofit
  Donors in the Private Donor Group at Fidelity Charitable can recommend a recoverable grant, which is made with an expectation of repayment, often tied to specific outcomes or milestones. Recommending a recoverable grant allows a donor to support charitable organizations that have a mechanism to repay—allowing recycling of these funds for future grants. Fidelity Charitable has made recoverable grants to Calvert Impact Capital, a community development organization that lends funds to organizations working in low-income communities. Through this collaboration, donors can support the financing of affordable housing, education and healthcare programs by recommending a recoverable grant.

Additional impact investing options are available to donors with more complex needs in the Private Donor Group at Fidelity Charitable or those utilizing the Charitable Investment Advisor Program (CIAP). These donors can recommend investments in a broader set of sustainable mutual funds, ETFs, and fixed-income products. Some of these donors may also consider recommending investments in impact-oriented private equity or venture capital funds.

“A common misconception is that impact investing requires sacrificing investment performance,” said Sarah Gelfand, director of Donor Programs at Fidelity Charitable. “This has been debunked by numerous studies, and companies that have embraced practices that are good for society have been demonstrated to exhibit lower financial risk. Recommending impact investments within a donor-advised fund is a way to support those companies while creating additional dollars for charity. We strongly believe impact investing can be an amplifier for a donor’s philanthropy.”

Highlights from the Study Include:

• Fidelity Charitable Giving Accounts had $856 million in impact assets at the end of Q1 2018, a 110% increase from the prior year.
• Over 70% of Millennials and Gen-Xers have made an impact investment, compared to just 30% of Baby Boomers and older investors.
• Investors were most interested in investing in public companies with good environmental or social practices, either by investing directly (58%), or through exchange-traded funds or mutual funds (56%).
• Seventy-nine percent of respondents in the study who rated charitable giving as “very important” to them also engaged in impact investing.