'You’re seeing people flock to impact investing, and now there are the returns.”
Eric Lemelson, a philanthropist and vineyard owner in Oregon, has been focused on clean-energy investments for nearly 20 years. Advisers say wealthy investors are considering impact investing.Impact investments, which aim to promote a social good or prevent a social ill, have significantly outperformed traditional bets during the coronavirus pandemic.
And their returns are enticing hesitant investors to rework their portfolios. Impact investing typically focuses on three categories: environmental, social and governance, known as E.S.G. Returns can be tracked through various exchange-traded funds. For example, the S&P 500 technology E.T.F., for example, is up 25 percent this year, while the S&P 500 energy E.T.F., which includes oil and gas stocks, is down 34 percent. Over all, 64 percent of actively managed E.S.G. funds beat their benchmarks versus 49 percent of traditional funds through the first week in August, according to research from RBC Capital Markets. The private markets are seeing similar interest. Take Vital Farms, which was founded in 2007 in Austin, Texas, to sells eggs from pasture-raised hens. “A few years ago, venture capitalists scratched their heads at an egg farm,” said Dave Kirkpatrick, managing director at SJF Ventures, which was one of the first private investors in the farm. But Vital Farms, which grew through private investment before going public at the end of July, is valued at more than $1 billion. Now, other investors are coming to him with questions about sustainable and profitable agriculture, said Mr. Kirkpatrick, who is also a founder of Impact Capital Managers, a trade group that seeks to show that impact investing can be a way to achieve higher returns. The coronavirus crisis may be a turning point for wealthy investors, whom advisers have long seen as a key constituency to expand the market for investments that aim to do good and still provide solid returns. “Every time something goes wrong in the world, it’s a boost to impact investing,” said Nancy E. Pfund, a managing partner and co-founder of DBL Partners. “There’s a generalized frustration that whatever people have been doing for the last X number of years, it’s not working.” This has caused a shift in strategy, she said: “You’re seeing people flock to impact investing, and now there are the returns.” Investment dollars have begun to follow returns. In the first half of the year, $20.9 billion went into impact funds, which was just shy of the amount of new money for all of last year, according to
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