Donald Trump’s surprising ascent to president of the United States has brought many unexpected effects to the financial markets. Ironically, one has been a rapid increase in interest and adoption of impact investing and other types of values-based investing.
Impact investing, or values-based investing, is a type of investing that helps people and/or organizations align their investments with their personal values. There are many varieties of this type of investing, and it goes by many names, including socially responsible investing and green investing. There has been a rise in assets in sustainable, responsible and impact investment strategies, to $12 trillion at the beginning of 2018, up from $8.72 trillion at the beginning of 2016, according to a US/SIF Foundation report on investing trends. So while I would definitely wager that most SRI professionals were disappointed that Trump won, the silver lining has been that it’s inspired many investors to align their money with their values. Ironically, the president has been good for the environment.
Various industry studies show that most individual investors are interested in sustainable investing. A Morgan Stanley survey found that 75% of individual investors (and 86% of millennials) are interested in sustainable investing, with 80% interested in investments that are customized to meet their values. Additionally, a Fidelity study shows 37% of millennials currently own sustainable investing strategies and another 40% are interested in adding them to their investment strategy.
This increasing demand for impact- and values-based investing certainly has been aided along by socially progressive investors who were spurred by the Trump election to vote with their wallets, according to some financial experts. Many Americans were surprised by Trump’s election, and some found themselves at an inflection point, suddenly wanting to express their values publicly through marches, privately through conversations (and arguments) with loved ones, and through how they spent and invested their money.
To that point, certified financial planner Cathy Curtis, owner of Curtis Financial Planning, said that she saw this directly in her own practice. “After Trump won, I had a meeting with one of my clients, a thoughtful and politically informed person; she was in shock at Trump’s win,” Curtis said. “During our meeting, my client told me she couldn’t stand the thought of her money being invested in companies whose CEOs were Trump supporters.”
Curtis explained that she didn’t have a way to screen for companies with Trump-supporting CEOs. “So I suggested that, over time, due to tax implications, we move [this client] into exchange-traded funds and mutual funds that screen for ESG [environmental, social and governance] criteria so that her investments would be more closely aligned with her values,” Curtis explained.
Joey Fishman, an investment advisor representative at Ritholtz Wealth Management, who is a subject matter expert for sustainability themed portfolios, saw a similar trend. “We received a ton of inquiries after Trump was elected,” he said. “Demand came from two different types of investors. The first were well-educated millennials who wanted to invest their values and were willing to put a ‘stake in the ground. That group aligns well with an evidence based process,” Fishman explained.