impact investing

As the popularity of impact investing continues to rise, a study from the Women’s Philanthropy Institute (WPI) found men and women approach impact investing differently.

“We wanted to look at impact investing as a combination of philanthropy and traditional financial investment,” says Jacqueline Ackerman, Assistant Director for Research and Partnerships at WPI.

What WPI found could affect both funders and the charities they support.

The first key finding is that when it comes to impact investing, men and women are investing at relatively similar rates, says Ackerman.

“That may sound like there is no gender difference but that is an interesting finding given that all the work that has been done on men and women in traditional investments shows that women are more risk averse, that women are more hesitant to enter into that word, that they are more unsure of themselves,” says Ackerman.

“So the fact they are impact investing at similar rates to men shows me that there is some sort of change happening or that impact investing is something that perhaps they are more passionate about. There is something going on there that is drawing women to it more than traditional investing.”

The second key finding is that men are more likely than women to replace their traditional charitable giving with impact investments.

“It seems like men are more likely to look at their financial portfolio and say, ‘I’ve got this money that I’m giving to charity, is there a way I can also make it work for me financially?” Whereas women see their charitable giving as sacrosanct. They are setting it aside and then looking at their financial portfolio and thinking, ‘What can I do with this differently so that it creates more social good’. So they are both coming to impact investing, but they seem to be coming at it from different perspectives.”

Let’s have a look at the major findings of the report.

Finding 1: Women and men are equally likely to be aware of impact investing, but women are more likely to want to learn about impact investing.

Men and women had nearly the same levels of awareness: 82.5% for men and 81.3% for women. Those who said they were aware of impact investing were older, wealthier (at least US$5 million in net worth) and equally or more risk-taking with their personal finances than their philanthropic finances.

People who wanted to learn more about impact investing were more likely to be women, younger, more educated, less wealthy and equally risk-taking with philanthropic and personal finances.

The statistics reveal that there is a gap between those who want to know about impact investing and those who actually have that knowledge – and a gender gap between those who want to know more.

Finding 2: Impact investors are younger, more educated, and have higher incomes. Women and men are equally likely to make impact investments, but gender differences appear for specific groups of people.

About one-third of survey respondents said they participate in impact investing (34%). While overall women and men are equally likely to make impact investments, married women are more likely to participate than married men, boomer women are more likely to impact invest than boomer men, but Gen X and millennial men are more likely to participate than their female counterparts. As income increased, respondents were more likely to make impact investments, with gender differences revealed in upper income brackets with women were more likely to participate.

There is, however, a ‘but’ attached to gender differences by age and income – they were not statistically significant. This is due to the limitation presented by the sample size and more research is required to establish if these differences do exist. As the WPI increases its pool of data it’s hoped that some of the analysis can be rerun to discover if these relationships are in fact meaningful.

Education was a statistically significant factor – people with at least a bachelor’s degree were statistically significantly more likely to impact invest. For women there was. Clear link between higher education levels and

As education increased, women were more likely to make impact investments but the link between men and higher education was weak, with a high percentage of less educated men also impact investing

Finding 3: People who impact invest in place of charitable giving are younger, more educated and have higher incomes.

The study then examined whether men impact investors do so in place of or in addition to their charitable donations? This question, of course has big implications for nonprofits and philanthropy.

The results showed that when men get involved, impact investing is more likely to crowd out regular charitable donations. Households where men make charitable giving decisions (either as single men or as sole deciders in their marriages) are more likely to replace charitable giving with impact investing. Single men were significantly more likely than other groups to replace their charitable giving with impact investing. Women are more likely to impact invest in addition to their more traditional philanthropy.

So what causes are getting crowded out? People who use impact investments in place of some or all of their charitable giving are associated with greater giving levels to religion, health, and animal causes.

And what issues are important to impact investors? People interested in climate change, human rights or race relations were more likely to impact invest. People who said the US economy/federal deficit or terrorism were important were less likely to impact invest

 What does it all mean?

For donors and funders impact investing is another way to effect change. “People are going to want to make investments that make the world a better place,” says Ackerman.

 For nonprofits, it’s a little more complicated

“You can either look at impact investing as a threat or an opportunity, but the reality is there is a threat that traditional nonprofits could lose dollars to impact investing,” says Ackerman

“It’s not a report that is intended to strike fear into the hearts of charities, but more to be prepared for the donor who wants make an investment in a way that you are not currently doing. There are going to be some nonprofits that are very well attuned to this sort of investment and are prepared to make the transition and offer these options to donors. There are nonprofits that really don’t have any way to offer an opportunity like impact investments.”

Ackerman says is charities are not in a position to offer donors such investments they need to be aware of that and work out how they can still approach donors in a way that communicates their value.

The report concludes that more research is necessary to support continued growth impact investing and to increase donors’ and investors’ knowledge and understanding about the outcomes it can produce.

It also notes that the vast majority of impact investing is done via corporations, foundations and investment firms rather than individuals. As such future research should examine how gender diversity in these organisations’ boards, leadership, and staff influence whether and to what extent these groups use impact investing.

But one things seems for sure – impact investing is here to stay.

The study was funded by the Bill & Melinda Gates Foundation and analysed data from the Bank of America/US Trust Study of High Net Worth Philanthropy series, conducted by the Indiana University Lilly Family School of Philanthropy biennially since 2006. The most recent study was conducted in 2016 with a sample of 1,435 high net worth households.

How Women And Men Approach Impact Investing adheres to the broad definition of impact investing from The Global Impact Investing Network (GIIN): “Investment made into companies, organisations, and funds with the intention to generate social and environmental impact alongside a financial return.”

To read the full report, go here.