The Impact Investing Institute has published a pioneering report, sponsored by Schroders, designed to help wealth managers understand the competitive landscape and capture the impact investment opportunity – to better support clients’ investment needs over the long-term.
The new report delivers key insights into the demand drivers for impact investing and how this area of investment can provide value to both clients and wealth managers.
The UK impact investing market is growing and was estimated to be £76.8 billion[1] in size at the end of 2023. However, this market has experienced comparatively limited adoption by the wealth management space. Research from the report shows that nearly 85% of wealth managers surveyed currently have a sustainable offering, but only around one third provide an impact offering. Interestingly, 76% believe a dedicated impact offering could be a valuable USP.
The report pinpoints four key reasons why wealth managers should consider providing an impact offering:
- Interest from diverse client base: There is clear evidence of interest in impact investing amongst private clients (ultra-high net worth in particular), family offices and charities, endowments and foundations, with younger generations in particular being an area of increasing demand.
- Client attraction and retention: Impact investing is proving to be a powerful tool for acquiring and retaining clients. Reports indicate that once clients engage with impact-focused investments, they tend to remain loyal, significantly enhancing client retention across generations.
- Meaningful differentiation: As the wealth management sector experiences consolidation and the centralisation of investment solutions, impact investing offers firms a distinctive edge.
- Simplified market entry: The landscape for impact investing is becoming more accessible, thanks to product innovation and increased opportunities in private market assets. Further regulatory initiatives are also simplifying the creation of impact-focused offerings for firms.
The report also identifies challenges – such as low client understanding, concerns around financial performance and operational barriers – and lays out ways to overcome them.
The final part of the report features a guide for wealth managers wanting to develop an impact offering that draws on the experiences and lessons learnt from others leading in the market.
Sarah Teacher and Bella Landymore, Co-CEOs at Impact Investing Institute said:
“We are delighted to launch this guide, supported by Schroders, which we hope will inspire wealth managers to consider developing an impact offering, and support them in doing so.
Our research shows that 86% of survey respondents reported an increase in interest for sustainable and impact investment over the last five years.
By clearly defining the opportunity, and outlining the practical steps needed, we aim to encourage wealth managers to work with their clients to tailor their investment strategies accordingly to meet this growing demand.”
Maria Teresa Zappia, Chief Impact and Blended Finance Officer at BlueOrchard and Global Head of Impact at Schroders, said:
“Impact investing has seen significant growth in recent years with clients increasingly recognising it as a compelling opportunity. This looks set to continue with 64% of survey respondents stating that younger clients show greater interest in impact investing. This presents a substantial opportunity for wealth managers and active management.
This research equips wealth managers with tools to develop their own impact investing service in a rapidly evolving market.”
Kate Dockreay, Sales Director Sustainability and Impact at Schroders said:
“We recognise the importance of the £1.4trn UK wealth management sector[2] to help the impact economy grow. Wealth management professionals are in a unique position as the stewards of clients’ assets. Understanding clients’ evolving preferences towards impact and how to effectively serve their client base will be important in determining the long-term success of their business.
We have launched this report to promote greater understanding and adoption of impact investing across the industry, emphasising the long-term opportunities available for those wanting to lead in this space.”
[1] Estimating-and-describing-the-UK-impact-investing-market.pdf
