impact investing

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Impact Investing Rise Good News for Women and Benefit Corps

Anne Field | February 8, 2017

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Impact investing is expanding, and that is creating new opportunities for social enterprises, including Benefit Corporations, women-led firms and community-based ventures.

Those are some of the implications of a recent study conducted by the Forum for Sustainable and Responsible Investment (US SIF) Foundation.

“There are encouraging signs for social entrepreneurs,” says Meg Voorhes, director of research for US SIF.

The report, US Sustainable, Responsible and Impact Investing Trends 2016, found that SRI assets have expanded to $8.7 trillion in the U.S., a 33% increase from 2014. That’s a significant portion of total assets under management.

There was good news for local business and women-led ventures.

For the first time since the study was started in 1995, gender lens investing was tracked separately. The advancement of women is a factor for $397 billion in institutional investor assets and nearly $132 billion in money manager assets.

Another growing trend has been a focus on place-based investing, especially in underserved communities. Community investing institution assets grew by almost 90%, from $64 billion to nearly $122 billion. The jump was driven by a large increase in assets of community development credit unions, which more than doubled since 2014, according to the report.

growth of impact investing
Credit: US SIF Foundation, Report on US Sustainable, Responsible and Impact Investing Trends 2016.

So what’s behind the overall increase in SRI investing? The number one reason cited by money managers (85%) was client demand. Other top factors included risk (81%), returns (80%) and social benefit (79%). And 63% pointed to fiduciary duty.

Climate change is another big factor. “It affects every portfolio in some way,” says Voorhes. “It’s drawing attention to the idea that the environment has to be taken into account.”

There’s also a higher comfort level these days as the field matures. Social and environmentally responsible investing has established a solid track record, and studies demonstrate a positive correlation between companies with strong ESG policies and overall performance.

For social enterprises, it means there’s a significant body of investors who are actively looking for companies with policies and products that have an impact on society and the environment.

According to Voorhes, the ventures likely to be of particular interest to investors are those registered as Benefit Corporations, a legal structure that embeds a social mission into the company’s charter, alongside its pursuit of profits. Thirty-one states now have such legislation, with another 7 in the works, according to the B Lab web site.

“They have this mission in their legal structure,” says Voorhes.

The study, which has been conduced every two years since 1995, examines U.S.-based asset managers and institutional investors using one or more sustainable investment strategies.

Anne Field is a New York-based journalist who writes about social enterprise and impact investing. A version of this article originally appeared on her Not Only For Profit blog on Forbes.com.

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