Vienna, November 16, 2018 - “What we need is a new kind of stock market – one trades not just in financial assets” – this strong statement was voiced by Susanne Lederer-Pabst, financial analyst and consultant and founder of the Vienna consulting firm 4-your-biz, in her article titled “Impact Investing and the Question of Meaning”, which was recently published in online-based German financial news provider Finanztrends.
Her company 4-your-biz, which she operates together with three other women financial experts, focuses on sustainability and impact investing and has been active in the field of financial consulting since 2011. Gradually, the team grew and today, Alexandra Bolena, Martina Nemeth-Beran, and Lisa Bacher are working together with Lederer-Pabst in offering customers financial advice on investment solutions with high ethical standards – true to the motto of the company: “Think (R)evolutionary! Improve Business!”
In her article, Susanne Lederer-Pabst compares impact investing with other forms of investing such as sustainable investing and also with philanthropy. According to her analysis, the main difference is that impact investing sets out to produce a specific, clearly defined impact aimed at finding long-term, sustainable, as well as measurable and scalable solutions for socially relevant issues. A financial return is expected and can actually be used to enlarge the positive impact of an investment. In contrast, philanthropic engagement is often aimed at providing short-term relief in emergency situations or catastrophe scenarios without expectation of a financial return. Still, impact investing and philanthropy can complement each other to produce an enhanced social impact, for instance by using subsidies as capital to help new impact investments get off the ground.
How to Get Institutional Investors on Board
At the moment, impact investing mostly attracts private investors committed to supporting market solutions for social problems. In the future, however, more institutional investors with larger investment volumes and thus greater leverage, such as insurances, pension funds and banks, should be induced to come on board and join the impact investing drive, argues Lederer-Pabst. To achieve this goal, their investment criteria – simple structure, a certain liquidity and easy handling of the investments – have to be taken into account. Here, the author calls on the legislation to act and create more attractive conditions for institutional impact investors – for instance by facilitating accessibility of investments and offering tax benefits.
New Generation of Millionaires Will Change the Investment World
In her article for “Finanztrends,” Lederer-Pabst also underscores the central role of the “next generation” in taking impact investing to a new level – where it will become part of the mainstream instead of hovering on the margin of the investment world. In this argument, she is seconded by Austrian Caroline Kuhnert, Head of Wealth Management for Central Europe, Eastern Europe & Turkey at UBS Group, a Swiss bank located in Zurich and one of the world’s largest asset managers. Kuhnert is convinced that the future of impact investing lies with the young generation – specifically with those who will inherit large fortunes. In an interview with German economic daily Handelsblatt, the investment specialist points out that, within the next 20 years, approximately 40 percent of the current wealth assets will change hands – a good thing since the young millionaires and billionaires are expected to contribute to a considerable rise in philanthropy and sustainable investment.
Central Role of Family Offices
Traditionally, the family offices always split their money between investments and philanthropy – more recently, however, a shift away from this strict division and towards impact investing has become noticeable, Kuhnert points out. She then goes on to cite the example of a customer whose 21-year-old daughter eventually managed to convince him to engage in impact investing by herself taking the first step in this direction. The father, initially an impact investing sceptic, invested in traditional assets, while the bank, upon his daughter’s request, put together a sustainable portfolio for her, which eventually performed better than his. As a consequence, the family office decided to make all its investments sustainable.
According to Kuhnert, his is not just a unique case, but indicative of a growing trend. Currently, around 40 percent of family offices are interested in sustainable investments, and almost half of them indicated an intention to enlarge their sustainable investments within the next twelve months, the investment expert points out. Kuhnert is convinced that this trend will stabilize and family offices will make a complete shift towards sustainable investments in the future.
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