By Priya Parrish
When my former colleagues at the environment, social and governance (ESG) research pioneer, KLD Research & Analytics, launched the bellwether Domini Social Index in 1990, one purpose was to measure what socially responsible investing was going to cost an investor in terms of financial returns. The index, along with numerous academic studies, proved that ESG factor integration does not have to negatively impact financial performance. The evidence drove client demand and product proliferation across every asset class, sector, geography, and investment strategy. During this time, I led the effort to catalyze the creation of Northern Trust’s ESG fund offerings and witnessed nearly every other major asset manager roll out ESG strategies. Today, over 20% of professionally managed assets in the U.S. incorporates ESG factors in investment decision-making.
Impact investing, which has an explicit intention of generating a measurable social and financial return, is going through a similar transformation right now. Early evidence suggests the same conclusion: that all else being equal, impact investors do not give up returns. While impact investing can apply to a wide range of asset classes and investment strategies, its most common product offering (by number of products) is venture capital funds. As it gains traction among all investor types, the need for impact investment products across every asset class and strategy will be essential to meeting the growing demand.
My vantage point comes from the roles I have played as a family office Chief Investment Officer and personal impact investor. Having managed a multi-asset class portfolio across global private and public markets, […]