[Originally published on LinkedIn as "Social Investing's David and Goliath Quandary"]
The numbers are in and they tell a pretty clear story: more people are investing with social progress on their minds. The most recent US SIF report shows that “investors now consider environmental, social and governance (ESG) factors across $8.72 trillion of professionally managed assets, a 33 percent increase since 2014.”
That's 20 percent of all investible assets in the U.S., according to US SIF. That’s not an emerging trend. It’s a substantial piece of the market that will continue to grow as younger investors increase earning power and older investors pass their wealth down to the next generation.
So we can stop talking about “if and when” socially responsible investing (SRI) becomes a viable investment strategy. It’s time to start focusing instead on how to have the greatest impact.
The big test actually comes in the form of massive scale, as investor demand has led large players to the social investing trough. To name a few, JP Morgan launched its Ethos product for ESG investors in February, BlackRock built a range of relevant funds in early 2016, and Morgan Stanley announced its Global Balanced and Global Balanced Defensive funds in August 2016.
What happens when this much horsepower busts onto the track? It becomes a different race.
SRI has fought long and hard to be considered as not just a different way to invest, but a sound way to invest. Investment firms that have been a part of that evolution created a formula that works because it’s built on substance, transparency, and fundamentals.
In 2017, investment advisors and managers that are active in SRI need to take the influx of assets and the entrée of global products seriously. Whereas wirehouse products may help investors check the ESG box, true SRI managers have a much more involved perspective on what makes investments social and smart. They need to aggressively demonstrate their value and the difference between their approach and mainstream “greenwashed” funds.
The architecture of social investing is about to be redrawn. The big question is who will shape that conversation – the pioneers who defined the space, or the powerhouses crashing the party? Who will lead the way?