Retail Investors Ready To Transform The Financial System: Report

The Rockefeller Foundation and Longitude, a Financial Times company, today released a new report and survey, The Individual Imperative: Retail Impact Investing Uncovered, that shows retail investors are poised to allocate a larger portion of their assets to impact investments, if both products and offerings, and sales and advisory channels can evolve to accommodate their needs.

The report, drawing on a survey of more than 200 retail investors and 300 advisory firms in the U.S and Europe, explores what it will take to truly democratize impact investment, including the expected growth potential of the industry, the key motivations of individual investors, how they weigh the merits of impact investment opportunities, and what the advisory community must do to activate this latent, yet captivated market.

Though once the domain of institutional investors, the practice of impact investment has blossomed across age groups, wealth brackets, and asset classes, and excitement and appetite is growing. 78% of retail investor respondents are aware of the principles of impact investing and are actively investing in impact investing funds/products.

More than half (55%) also expect to increase their impact investments from 4-5% to 6-20% over the next two years, with roughly a third of respondents (29%) ranking "a personal issue close to my heart" as one of their top reasons to incorporate impact investing into their portfolios.

The findings reflect a wider shift in the very nature of investment. Post-financial crisis, investors' faith in the financial system is being restored through the ability to create a link between strong financial returns and social impact.

The majority (72%) of millennial respondents—a generation hit hard by the 2008-09 crisis—disagree with the suggestion that "impact investing cannot fix a financial system that is inherently imbalanced or unequal," highlighting a motivation to improve the system from within. Furthermore, while half of advisors view 36-49 years as the age group currently most involved in impact investing, 29% identified millennials, ages 18-35, as the second most active group.

Yet despite significant appetite for impact investing, barriers to greater adoption by retail investors remain. New and innovative product availability, a disconnect of knowledge and education between investors and advisors, and an overall lack of standardization in measuring the "impact" of investments, comprise the greatest hurdles.

Respondents are clear that, to remain relevant in this market, advisors must adapt to the mindset of the modern investor, which means finding investments that offer transparent, measurable impact, while still delivering financial ROI that is competitive against traditional investment products.

They cite "depth of direct impact investment knowledge and experience" as the most important quality for investors when selecting an advisor—and 73% rank it among their top three criteria.

"This research provides demonstrative proof that the next frontier for impact investing lies with mass affluent retail investors, who are projected to have some $100 trillion in investing power globally by 2020," said Saadia Madsbjerg, managing director at The Rockefeller Foundation. "There is a clear need to develop innovative, scalable products—particularly through brokerage and retirement platforms and services, which we believe hold the greatest potential to activate retail impact investors—as well as a more sophisticated understanding of the impact investment market on the part of advisors."

Among The Individual Imperative: Retail Impact Investing Uncovered's key findings:

• Social and financial ROI in tandem: The research reflects a growing belief among retail investors that they can generate both financial and social returns from investments.
• From awareness to action: The vast majority (78%) of retail investor respondents who are aware of impact investing state that they are currently making impact investments. Over half (55%) of those respondents expect their allocation to impact investing funds/products within their portfolios to increase to 6-20% over the next two years.
• Bridging the perception gap: The findings highlight a disconnect between how advisors believe they are perceived by clients and the actual perspective of investors looking to gain a foothold in impact investing.
• Guided by hearts as well as minds: Investors are driven by personal values rather than relying purely on metrics-driven returns.
• New vehicles for capital to make impact: While appetite for impact investment is growing, there is a need to develop innovative, scalable products for the growing base of retail investors.

A full copy of The Individual Imperative: Retail Impact Investing Uncovered can be downloaded at: https://www.rockefellerfoundation.org/report/individual-imperative-retail-impact-investing-uncovered/.

About The Rockefeller Foundation
The Rockefeller Foundation advances new frontiers of science, data, policy and innovation to solve global challenges related to health, food, power and economic mobility. As a science-driven philanthropy focused on building collaborative relationships with partners and grantees, The Rockefeller Foundation seeks to inspire and foster large-scale human impact that promotes the well-being of humanity throughout the world by identifying and accelerating breakthrough solutions, ideas and conversations. For more information, visit www.rockefellerfoundation.org.

FT Focus reports consist of independent research and content produced by Longitude, a Financial Times company. The sponsor had no sight or approval prior to publication.