Some 76% of those surveyed in the latest Impact Investing Institute report, sponsored by Schroders, have said a dedicated impact offering could serve as a valuable USP.
Designed to help wealth managers understand the competitive landscape and capture the impact investment opportunity, the report delivers key insights into the demand drivers for impact investing and how this area of investment can provide value to both clients and wealth managers.
The UK impact investing market is growing and was estimated to be £76.8bn in size at the end of 2023, the report stated. However, the market has experienced comparatively limited adoption in the wealth management space. Nearly 85% of wealth managers surveyed currently have a sustainable offering, but only around one-third provide an impact offering.
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Sarah Teacher and Bella Landymore, co-CEOs at Impact Investing Institute said: “We are delighted to launch this guide, supported by Schroders, which we hope will inspire wealth managers to consider developing an impact offering, and support them in doing so.
“Our research shows that 86% of survey respondents reported an increase in interest for sustainable and impact investment over the last five years.
“By clearly defining the opportunity, and outlining the practical steps needed, we aim to encourage wealth managers to work with their clients to tailor their investment strategies accordingly to meet this growing demand.”
The report pinpoints four key reasons why wealth managers should consider providing an impact offering.
Firstly, there is clear evidence of interest in impact investing amongst private clients (ultra-high net worth in particular), family offices and charities, endowments and foundations, with younger generations in particular being an area of increasing demand.
Impact investing is also proving to be a powerful tool for acquiring and retaining clients, with reports indicating that once clients engage with impact-focused investments, they tend to remain loyal, significantly enhancing client retention across generations.
Product innovation and increased opportunities in private market assets are also making market entry much simpler, with further regulatory initiatives simplifying the creation of impact-focused offerings for firms.
Meanwhile, as the wealth management sector experiences consolidation and investment solutions are becoming centralised, impact investing “offers firms a distinctive edge”.
The report also identifies challenges – such as low client understanding, concerns around financial performance and operational barriers – and lays out ways to overcome them.
Taking these points into account, the report features a guide for wealth managers wanting to develop an impact offering that draws on the experiences and lessons learnt from others leading in the market.
Maria Teresa Zappia, chief impact and blended finance officer at BlueOrchard and global head of impact at Schroders, added: “Impact investing has seen significant growth in recent years with clients increasingly recognising it as a compelling opportunity. This looks set to continue with 64% of survey respondents stating that younger clients show greater interest in impact investing. This presents a substantial opportunity for wealth managers and active management.
“This research equips wealth managers with tools to develop their own impact investing service in a rapidly evolving market.”
