Wealth managers should consider providing an impact offering to take advantage of opportunities in the impact investment space and meet demand from private clients, according to a report by the Impact Investing Institute.

The report, sponsored by Schroders, aims to support wealth managers in understanding the landscape and ‘capture’ the impact investment opportunity to better support their clients’ long-term investment needs.

It noted that while the UK impact investment market was growing and worth £76.8bn at the end of 2023, the market had seen relatively limited adoption by wealth managers.

Research in the report showed that while nearly 85 per cent of wealth managers had a sustainable offering, only around a third provided an impact offering.

More than three-quarters (76 per cent) felt that having a dedicated impact offering could be a valuable unique selling point.

The report identified four ‘key reasons’ why wealth managers should consider an impact offering, including ‘clear evidence’ of interest in impact investing amongst private clients, particularly ultra high net worth and younger clients, as well as family offices, charities, endowments, and foundations.

Furthermore, it argued that impact investing was a powerful tool for acquiring and retaining clients; that it offered firms a ‘distinctive edge’ amid industry consolidation and the centralisation of investment solutions; and that impact investing was becoming more accessible through product innovation, increased opportunities in private market assets, and regulatory initiatives.

Challenges such as low client understanding, concerns around financial performance, and operational barriers were identified in the report, which included ways to potentially overcome these challenges.

The final part of the report has a guide for wealth managers looking to develop an impact offering, drawing on experiences from others in the market.

“We are delighted to launch this guide, supported by Schroders, which we hope will inspire wealth managers to consider developing an impact offering, and support them in doing so,” commented Impact Investing Institute co-CEOs, Sarah Teacher and Bella Landymore.

“Our research shows that 86 per cent of survey respondents reported an increase in interest for sustainable and impact investment over the last five years.

“By clearly defining the opportunity, and outlining the practical steps needed, we aim to encourage wealth managers to work with their clients to tailor their investment strategies accordingly to meet this growing demand.”

Schroders global head of impact and BlueOrchard chief impact and blended finance officer, Maria Teresa Zappia, said: “Impact investing has seen significant growth in recent years with clients increasingly recognising it as a compelling opportunity.

“This looks set to continue with 64 per cent of survey respondents stating that younger clients show greater interest in impact investing. This presents a substantial opportunity for wealth managers and active management.

“This research equips wealth managers with tools to develop their own impact investing service in a rapidly evolving market.”

---