The Rise of Impact Investing: How the "Woke" Investor is Shaping the Future of Wealth Management

The term “woke” has become increasingly popular in recent years, particularly in the context of social and political awareness.

The term is now being applied to a new generation of investors, who are focused not only on financial returns but also on making a positive impact on the world.

These “woke” investors are also known as impact investors, and they are shaping the future of investing by considering both financial returns and social and environmental impact.

In this comprehensive guide, we will discuss the rise of impact investing, the benefits and challenges of this investment strategy, the next generation of millionaires and the future of wealth management.

What is an Impact Investor?

An impact investor is an individual or organisation that actively seeks out investments that not only provide financial returns but also have a positive social or environmental impact.

Impact investments can include a wide range of assets, such as stocks, bonds, real estate, and private equity.

Impact investors typically focus on renewable energy, sustainable agriculture, and affordable housing sectors.

These investments are made to create a measurable, beneficial social or environmental impact alongside a financial return.

The Growth of Impact Investing

Impact investing is a relatively new concept, but it has been growing rapidly in recent years.

According to a report by the Global Impact Investing Network (GIIN), impact investing assets under management have grown from $114 billion in 2014 to $715 billion in 2020. This growth is expected to continue, as more and more people become aware of the potential of impact investing to make a positive impact on the world.

Factors such as increased awareness of environmental and social issues and the emergence of new technologies are driving this growth.

The Next Generation of Millionaires

The “woke” investor is often associated with the next generation of millionaires. These investors are typically millennials and Gen Z, who are more socially and environmentally conscious than previous generations.

This demographic is becoming increasingly interested in impact investing, as they want to positively impact the world and use their wealth for good.

A study by Morgan Stanley found that millennials and Gen Z are more likely to invest in companies that align with their values and are willing to sacrifice some financial returns for the sake of impact.

The Benefits of Impact Investing

Impact investing not only allows investors to positively impact the world, but it also offers a number of financial benefits.

Impact investments can provide diversification, as they often operate in sectors and regions that are not well-served by traditional investments.

Additionally, impact investments can provide a hedge against inflation, as they often focus on sectors that are resilient to economic downturns.

Furthermore, impact investing can also provide a source of social and environmental impact, a way to positively impact the world.

The Challenges of Impact Investing

Impact investing is not without its challenges. One of the main challenges is the lack of standardisation in impact reporting and measurement.

This can make it difficult for investors to compare the social and environmental impact of different investments.

Additionally, impact investing can be more complex and time-consuming than traditional investments, as it requires a more active approach to security selection and portfolio management.

Due to the lack of standardisation, it can be difficult for investors to find accurate and reliable information about the impact of their investments.

Conclusion

The “woke” investor, also known as the impact investor, is shaping the future of investing.

These investors are focused not only on financial returns but also on positively impacting the world.

Impact investing is a growing trend and offers several benefits, including diversification, inflation hedge, and social and environmental impact.

However, it’s important to remember that impact investing has challenges, such as a lack of standardisation and a more active approach to security selection and portfolio management.

As a “woke” or impact investor, it’s important to be informed, research, and make conscious choices while planning your investments.

It’s also important to be aware of the potential for “greenwashing”, where companies market themselves as socially and environmentally responsible but don’t follow through on those commitments.

The next generation of millionaires and investors are becoming more conscious of their impact on the world, and impact investing is becoming a mainstream strategy.

The future of wealth management will be shaped by the demand for investments that align with an investor’s values and positively impact the world.