In the last few decades, investing has been transformed. There is a growing movement to recognize individuals and indexes, personal values and profits. Impact investing has attracted attention and assets; becoming a powerful force for social good. With billions of dollars flowing into these sustainable funds, such strategies are top of mind for wealth management professionals and their clients. For my recent RobustWealth Roundtable, I explored this topic with Essma Bengabsia, Sr. Associate of Sustainable & Impact Investing at Glenmede.
We began by discussing the dramatic rise of impact investing. In addition to social and regulatory changes, Essma outlined a mental shift as investors now realize factors such as ESG (Environmental, Social, Governance) in investing decisions may not equate to reduced returns. In fact, some say considering investment impact may enhance your strategy and mitigate your risk. This bodes well for your portfolio and the planet.
Investment impact may be global or personal. Essma recently authored a primer entitled, “Racial Equity Investing: Opportunities for Impact & Alpha.” In this report, she examined how investors may use their capital to generate market returns and dismantle inequities. Examples include investing in businesses owned by and operating in low-income communities, as well as supporting the pipeline to develop a more diverse workforce. By tapping into these new market segments, investors may see positive market returns and greater social impact.
“Can doing good mean doing well? My answer is, ‘Absolutely yes!’ I intend on building my career around this.”Essma Bengabsia, Sr. Associate of Sustainable & Impact Investing at Glenmede
Communities of faith exemplify this dedication to positive impact. In the United States, we see an increasing number of Jewish, Muslim, Catholic, and Protestant investors working together to tackle global issues. It’s nothing new – believers have been activists for centuries. In many ways, they are considered the “old guards” of the industry. From Catholic nuns managing endowments to Jewish organizations offering subsidized housing, Essma acknowledges that, “There is a lot we can learn from faith-based investors and apply to the rest of the industry.”
The industry is certainly learning. With any market, there have been unique and significant challenges. Skepticism, greenwashing, and regulatory inconsistencies have been pervasive. Some investors are hesitant, voicing concerns around these strategies being emotional reactions and temporary hype. Essma encourages investors to practice due diligence by reading trusted research and reviewing any impact claims to identify which managers actually integrate ESG considerations in their investment decision-making process. You should always investigate before you invest.
Despite the challenges, leading organizations and faith-based communities provide examples of navigating these market opportunities. As Essma showed, advisors can discuss these strategies with clients and work to align their goals with their values. Across industries, we’re beginning to understand that investment gains and social good can go hand-in-hand. Buy, hold, and begin to change the world.
For more information on Essma Bengabsia’s work, connect with her on LinkedIn at https://www.linkedin.com/in/essmabengabsia.