Social Responsibility

Impact Investment Takes Hold

Eine Menschenschlange vor einer Pumpstation in Äthiopien (Foto von 2005). Wasserbeschaffung, obwohl körperliche Schwerstarbeit, ist meist Aufgabe von Frauen und Kindern. Wasserstellen liegen oft weit von Siedlungen entfernt, dazu ist das Wasser oft verschmutzt. Mit der Trinkwasser-Aktion "1 Liter für 10 Liter", die Unicef zusammen mit dem Getränkekonzern Volvic ins Leben rief, leistet das UN-Kinderhilfswerk Hilfe zur Selbsthilfe. Im Gegenzug für den Kauf einer Literflasche realisiert Volvic die Gewinnung von zehn Litern Trinkwasser durch Brunnenbau in den Dürregebieten von Äthiopien. Foto: Roland Michels/rm-fotodesign/Volvic +++(c) dpa - Report+++ [ Rechtehinweis: (c) dpa ]
People standing in line to pump water in Ethiopia: an investment that comes with the additional benefit of doing good.
  • Why it matters

    Why it matters

    Despite lower returns, the wealthy are looking for more socially responsible investment opportunities.

  • Facts

    Facts

    • Around €77.4 billion is invested globally through impact investment schemes.
    • So far, family-controlled investment groups and wealthy individuals account for only 13 percent of the global volume of impact investments.
    • The majority of investors’ wealth remains invested in stocks, bonds and cash holdings, though this may start to change as the effects of low interest rates become more noticeable.
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    Audio

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“Impact investing” is a dreamy amalgam of financial and social goals, promising an acceptable rate of return with the satisfaction of also attempting to save the world.

Coined in 2007 by the Rockefeller Foundation shortly before the financial crisis, it’s still relevant nearly a decade later. It mostly attracts wealthy people who prefer to promote social enterprises that can make a difference rather than simply donating their money.

“The younger heirs of large fortunes, in particular, want to contribute to development objectives formulated by the World Bank,” said Thomas Rüschen, chief executive of the Deutsche Oppenheim Family Office, which specializes in wealth management and is responsible for more than €10 billion in the sector. “Issues such as the exclusion of investments in weapons, nuclear energy or alcohol have long been standard, but now it’s also about actively financing positive examples.”

“Impact investing is still missing a broad breakthrough. Though everyone listens closely at customer presentations, it’s still a minority that really puts up their money.”

Thomas Rüschen, CEO of Deutsche Oppenheim Family Office

So far, family-controlled investment groups and wealthy individuals account for only 13 percent of the global volume of impact investments. Because of the prevailing zero interest rate policy, investors have reduced their holdings of fixed income securities in recent years and now other alternatives are on the rise. It’s becoming more common, for example, to seek out financing structures that combine private and public resources in funds to be used as microfinance loans.

“Private investors such as family offices can expect a return of three to four percent from these,” Mr. Rüschen said.

But it’s difficult for private investors with less wealth to break into impact investing. Not only is the minimum investment often quite high, but it’s also hard to gain a quick impression of how effective they will be.

“For wealthy clients, access through a professionally managed product is recommended over individual investment, because they require enormous amounts of participation and control – especially if you invest abroad,” said Florian Meister, Managing Director of Finance in Motion, where impact investment minimums start at €125,000.

For years, alternatives like impact investing and private equity have only accounted for about 10 percent of the wealth of rich investors, while the lion’s share remains invested in stocks, bonds and cash holdings.

Industry observers think that the value of these alternatives is likely to increase to 15 percent in 2016 as the impacts of low interest rates become more noticeable.

“This is why professional investors are coming to accept that these assets are illiquid,” said one wealth manager.

Impact investing has a global volume of around $77.4 billion. The expected return of almost half of investors is below the market level, so they are willing to tolerate a little compromise on the interest. But the market for impact investing is far from becoming a mass phenomenon.

“Impact investing is still missing a broad breakthrough,” Mr. Rüschen said. “Though everyone listens closely at customer presentations, it’s still a minority that really puts up their money.” Nevertheless, there are more and more customers who say, “if I can do some good, then I’ll forgo some of the return. It’s worth it to me,” he said.

It’s also clear, he added, that major future problems such as water scarcity, healthcare and education crises cannot be resolved by public funds or donations alone.

 

Peter Köhler heads Handelsblatt’s banking team in Frankfurt. To contact the author: koehler@handelsblatt.com.

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