Ten years ago, wealthy families who wanted to invest in start-ups and companies working to solve some of the planet’s biggest social and environmental problems depended on one another for information about investment opportunities. Often, they would gather at retreats to compare notes and discuss best practices in the nascent field of impact investing.
Back then, there were just a handful of advisors with expertise in impact investing. It was rare to find one who actually understood global warming or poverty alleviation in frontier markets. Few ran a portfolio large enough and diverse enough to help families and organizations incorporate impact objectives while providing risk-adjusted returns. Those were pioneer days for impact investing—exciting for investors who understood that they could do so much more with their financial assets than simply make money but were limited in the types of investments and the range of returns available to them.
Since then, according to the Global Impact Investing Network (GIIN), assets under management with an impact focus have surged to $228 billion.[1] In 2016, one-fifth of all professionally managed assets in the U.S. used Environmental, Social and Governance (ESG) or Socially Responsible Investments (SRI) strategies, for a total of $8.72 trillion.[2] We believe that number is probably closer to $10 trillion today.
As investors seek more nuanced advice that aligns investments with personal or organizational values, advisors need to combine traditional methodologies focused on risk-adjusted returns with specialized due diligence incorporating impact criteria and evolving views on good corporate citizenship and socially responsible business models. How these considerations translate into practical portfolio strategies that meet long-term wealth-management goals is, increasingly, figuring into discussions today within the leadership of investment management firms.
Responding to this exciting shift in the landscape, Tiedemann Advisors (“Tiedemann”) and Threshold Group (“Threshold”), an early leader in the impact investing space, joined forces at the beginning of this year. The combination’s additive value derives from Tiedemann’s reach and scale—it has $18 billion under advisement[3] and provides a range of services including trust services—and Threshold’s expertise in sourcing and evaluating opportunities in a world of proliferating impact investment products.
While consolidation is an important theme reshaping the investment management business, a key consideration for both firms was not to detract from our respective abilities to know our clients as intimately as we always have. At the same time, we both recognized the need for more resources to offer timely insights to our clients across the spectrum of asset management.
We also appreciate the similarity of our cultures: We both serve high-net-worth clients and endowments in a highly client-centric environment, and both are family-founded, with the Russell family behind Threshold and Michael Tiedemann, son of Carl Tiedemann (its founder) heading Tiedemann. The combination came at the perfect time as Tiedemann sought to incorporate impact strategies into its client offerings. Applying institutional-level due diligence standards to its impact practice, Tiedemann now provides an impact report alongside financial reports so that clients can better understand all the ramifications of their investments.
As for experience in the impact field, I cut my teeth working in the microfinance sector in Emerging Markets, later for the Omidyar Network and then as CEO of Toniic, the global action community for impact investing. Our team also includes Brad Harrison, an environmentalist and wealth advisor, who has helped craft some of our investment strategies, including those related to the fossil fuel Divest/Invest Pledge many of our clients have taken. (This pledge involves investors conducting carbon audits of their portfolios to strategically lower the carbon footprint of investments and reinvest in scalable energy efficiency.)
The impact movement will continue to grow, and with it, so will the number of investment options for those seeking positive outcomes that extend beyond financial returns. Even traditional publicly traded corporations are becoming more attuned to the impact mindset, as they are under pressure by shareholders and customers to treat employees fairly, take stands on social and environmental issues, and give back to the communities in which they operate. There also has been a long-overdue recognition that, with the right design and under the right management, socially responsible investments can provide market-rate, risk-adjusted returns—and smart risk management, as any company moving to mitigate exposure to fossil fuels can confirm.
Meanwhile, investors have become more informed about corporate transparency, social entrepreneurship and issues like climate change and food security. They’re looking for the kind of sophisticated advice and deep knowledge from their advisors that reflects this broader awareness and adds value to traditional insights and portfolio strategies.
This is especially true among millennials and women. Often philanthropically minded, they are looking to connect with advisors and have their values factored into investment decisions in a way that is often difficult to accomplish within the world of large financial and wealth management organizations.
While some investors are still taking a wait-and-see approach to it, the increasing amount of impact-oriented assets under management, along with the influx of big Wall Street firms into the space, point to a more conscientious ecosystem for private capital. Tiedemann is proud to be taking the lead in illuminating this space for a growing family of investors.
[1] https://thegiin.org/research/publication/annualsurvey2018
[2] https://www.ussif.org/files/SIF_Trends_16_Executive_Summary(1).pdf
[3] Threshold assets under management was $3.5 billion at the time of the merger.
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Tiedemann Advisors (“Tiedemann”) is a SEC-registered investment advisor. Impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside financial return. Impact investments span multiple asset classes and investment structures. For example, impact investors can invest indirectly into investment funds or directly into companies and/or non-profits. Financial returns can range from the below market to the market rate. Tiedemann makes no representation as to the performance metrics of any third-party organizations or the achievement of underlying impact goals. Tiedemann cannot guarantee the social or environmental outcomes and/or prevent mission drift. Where applicable, achievement or compliance with these metrics should be evaluated over the longer-term rather than any shorter time periods indicated. Certain information has been provided by and/or is based on third party sources and, although believed to be reliable, has not been independently verified and Tiedemann is not responsible for third-party errors. This information is not a recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security, including an interest in any investment vehicle managed or advised by Tiedemann or its affiliates.