Market Momentum: Impact Investing & High Net Worth Canadians 2018
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2 018 Market Momentum: Impact Investing & High Net Worth Canadians
Table of
Contents
PAGE 3 PAGE 17
Acknowledgements Survey Findings
PAGE 4 PAGE 17
Investor interest levels
Objectives
PAGE 20
PAGE 5 Portfolio strategy & tool usage
Trends and Highlights
PAGE 22
PAGE 7 Perception of performance and risk
Summary of recommendations
PAGE 23
PAGE 8 Market outlook: Barriers & levers
Background PAGE 25
PAGE 8 Looking Forward
Impact investing
PAGE 25
PAGE 8 What this means for the market
Characteristics of an
PAGE 25
impact investment
Beachhead market
PAGE 10
PAGE 26
Examples of impact investments
Recommendations
PAGE 11
Impact investing market size PAGE 30
PAGE 12 Glossary
Understanding investment interests
and activities of Canadian HNWIs
PAGE 13
Methodology
PAGE 14
Research Limitations
PAGE 15
Demographics
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 2
ACKNOWLEDGEMENTS
MaRS and SVX would like to extend a special thank you to the sponsor
of this research. This work has been graciously supported through
the Social Enterprise Demonstration Fund (SEDF).
Key Partners:
Authors
Adam Spence
Marie Ang
Sunny Han
Editors
Anisha Jain
Beth Zabloski
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 3
Objective
In 2017, SVX began a research and • E
ngage: Grow the base of prospective
engagement initiative to develop and active HNWIs participating in
a greater understanding of high impact investing; and
net worth individuals’ interest in and
• I nvolve: Drive participation in future
experience with impact investing.
impact investing networks, events and
To date, Canadian studies and research
initiatives, particularly among project
on impact investing has focused on
partners, to convert interest to action.
investments made by large institutional
investors and funds. As such, there is a 277 individual investors were surveyed
lack of in-depth insights into individual for this reseach project. This work
investors’ views on impact investing. was supported by our government
The aim of this report is to provide a partners, as well as by numerous
comprehensive perspective of high net financial institutions, advisors and
worth individuals (HNWIs) in Canada our investor community.
and their investment preferences,
interests, barriers and levers.
Overall, we are seeking to achieve
the following goals.
• E
ducate: Develop an improved
understanding of impact investing
among a key investor segment;
• I nsight: Display data collected from
investor engagement surveys and
provide novel information, trends
and outlooks on impact investors;
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 4
Trends and
Highlights
1. The vast majority of Canadian 3. Canadian HNWIs want to • 4
8.6% of all respondents were
HNWIs are interested in invest with their existing banks willing to pay additional fees
impact investing or financial advisors to facilitate impact investing
• 8
9.8% of all investors surveyed • 5
1.5% of all respondents would transactions, if required
expressed some degree of interest be interested in making impact • 3
7.1% of respondents sourced
in impact investing investments only through financial from a general pool of financial
institutions or advisors institution clients would be willing
• M
ore significant interest was
shown by investors who are more • A
lmost 3 in 4 respondents (73.2%) to pay increased fees to facilitate
experienced, younger, wealthier sourced from a general pool of impact investing options
and female financial institution clients would
5. There are barriers to impact
pursue impact investing options
2. Many Canadian HNWIs are investing among Canadian HNWIs
with their current financial
active impact investors or would institutions or advisors • The top three barriers are:
like to make impact investments
• T
he reliance on financial institutions 1. L
ack of qualified advice
in the next year
or advisors increased with the and expertise
• 3
3.5% of all respondents have respondents’ age
2. L
ack of viable products
already invested with impact,
and investment options
with 19.1% of investors currently 4. Canadian HNWIs are willing to
considering options take some risk and pay additional 3. Lack of liquidity
• 4
7.9% of all respondents indicated fees for impact investing
plans to increase their allocation • 4
7% of all respondents were willing
of assets toward impact investing to take at least some risk with portions
in the next year of their portfolios
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 5
Highlights of active and interested impact investors
There is a high potential market for impact investing amongst high net worth individuals in Canada. One in three HNWIs responded
as a current impact investor, with almost 90% expressing interest of investors surveyed, over 52% are investing or intending to invest
for impact over the course of the upcoming year. There are some key characteristics of current and prospective impact investors:
Gender: Age:
Women were slightly more interested than
men to explore impact investing options
Younger investors
(25-54) were more
likely to pursue impact
91.8% 89.0% investing options
Asset classes and products: Wealth Level:
Investors were most Retail investors and
interested in public HNWIs with high total
equity (including impact investible assets (>$10
ETFs), green bonds, million) showcased most
and private equity willingness towards
investing with impact
Sector interest:
Investors were most interested in:
Energy Health Food Education
& Cleantech & Wellness
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 6
Summary of
recommendations
Individual high net worth investors
Ask for impact: Raise questions
about portfolio composition, impact
investment options and impact
measurement during regular
engagement with wealth managers
or investment advisors.
Financial institutions and advisors
Offer impact options: Develop a
diverse pipeline of impact investment
products and offerings across asset
classes in collaboration with impact
investing market stakeholders.
Train and hire for impact: Acquire
and develop staff expertise in impact
investing through professional
development, ongoing training,
and hiring activities.
Impact ventures and funds
Manage and measure impact:
Manage businesses and offerings
with clear, direct, intentional and
measurable impact to establish
advantage and a unique value
proposition for investors.
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 7
Background
What is impact investing? What are the characteristics • m
easures and reports impact
for underlying investments. This may
According to the Global Impact Investing of an impact investment?
include tracking and reporting data
Network, impact investments are: such as the tonnes of greenhouse gas
“Investments made into companies, At its core, impact investing is really
an approach to any investment that: emissions reduced or the number of
organizations, and funds with the persons employed from marginalized
intention to generate social and • h
as an intention to achieve communities. Ideally, one would
environmental impact alongside a positive social and/or also ensure that these figures are
a financial return.”1 environmental impact through reasonably verifiable, both internally
a business model that aims to and externally, over time.
Examples of impact tackle a market shortfall, problem
investments include: or externality. For example, Oliberté • a
chieves a financial return from
aims to support workers’ rights and return of principal and below market
• a private equity investment in
provide employment in Sub-Saharan rate to market rate and even market-
an early-stage company focused
Africa through a sustainable lifestyle beating financial return. Although
on early childhood education;
brand that includes footwear and philanthropy is complementary,
• a community bond investment accessories. An underlying investment through a blended finance model,
in a solar power co-operative; may also seek to improve existing impact investing does not include
• an exchange-traded fund composed conditions by using responsible charitable contributions.
of positive impact companies that principles in their procurement, Moreover, impact investments cut
derive a majority of their revenue production, distribution channels, across a range of asset classes and
from products and services that align environmental footprint, worker products, from private debt and equity
with the United Nations’ Sustainable rights and community. Sustainable to traditional investments including
Development Goals; or consumer products companies cash equivalents, fixed income, real
like Klean Kanteen and Seventh estate and publicly traded shares to
• a social impact bond that is funding
Generation would be examples more novel investments like social
the prevention of youth homelessness.
of companies that intend to improve impact bonds and carbon credits.
current approaches to business.
1. Global Impact Investing Network (GIIN). What you need
to know about impact investing. Retrieved from:
https://thegiin.org/impact-investing/need-to-know/#s1
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 8
Ideally, impact investments have the a change at a national or global scale clean technology: sustainable
following additional characteristics: with modest or high growth that can technologies in agri-tech, energy,
• hey achieve deep or wide
T touch the lives of thousands or millions smart cities and water;
impact at scale. Deep impact is of people. For example, Lucky Iron Fish
work and learning: work and learning
defined as change in a community or has positively impacted the lives of tens
technology innovations creating
neighbourhood, or changing the quality of thousands of people in countries
opportunity for all Canadians;
of life of a particular group of people. across the globe by preventing iron
deficiencies and anemia. health and wellness: diagnostic
One example is an enterprise like Tecla
devices, digital health, assistive
that is improving the quality of life for • T
hey align with particular
technologies, remote health technology
people with barriers to communication sectors, including:
and health information management;
or mobility. Wide impact is defined as
food: natural, local and organic
foods, fair trade, and ethical and
Example: Model 100% Impact Investment Portfolio sustainable food; and
Across Asset Classes, Cordes Foundation 2015 2
social inclusion: employing or
CORDES FOUNDATION 100% invested for impact. serving persons with disabilities,
persons living in poverty, First Nations
individuals, and new Canadians, and
12%
providing affordable housing.
Cash
• hey align with certain standards
T
and frameworks for measuring
and managing impact. There are a
number of leading industry standards
14% 38%
that have been developed for the
Private Debt Public Equity
impact investing marketplace. The
B Impact Assessment developed
by B Lab examines impact on the
environment, community and
26% workers, as well as the governance
Private Equity and business operations of ventures.
It provides a proven and verifiable
10% third-party standard where ventures
Public Debt can be compared across industries
and geographies. The Impact
Reporting and Investment Standards
Impact Examples Comment (IRIS) developed by the Global
Impact Investing Network (GIIN) can
Boston Common Public-equity portfolio of international
provide guidance on metrics. Some
International ADR Portfolio corporations scoring highly on human
rights and environmental impact organizations have also chosen to
organize and align their metrics with
Green Alpha Next Economy Public-equity portfolio of green the UN’s Sustainable Development
companies addressing economic/
environmental challenges affecting Goals. Moreover, there are a number
the eco-efficiency of operations of frameworks that can be leveraged
to help track and improve impact
Soko Direct investment in for-profit
over time. The general Theory of
women-owned enterprises connecting
artisans in the developing world with Change framework or systems like
the global consumer marketplace Bridges Impact+ are very helpful.
Sarona Frontier Markets Fund II Fund-of-funds vehicle investing via
local fund managers in small- and
medium-size enterprises in frontier 2. Milburn, Robert. Impact Investing Done Right. Barron’s.
and emerging markets November 28, 2015. Retrieved from: https://www.barrons.com/
articles/impact-investing-done-right-1448684226
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 9What are examples of impact investments?
Genus Capital’s Fossil Addenda Capital’s
Free High Impact Impact Fixed First Nations
Equity Fund Income Fund Oikocredit SolarShare Bank of Canada
The fund seeks to make Addenda Capital’s Oikocredit is a SolarShare is Canada’s First Nations Bank
positive social and Impact Fixed Income worldwide co- largest renewable of Canada is a Charter
environmental impacts product focuses on operative and power co-operative. 1 bank that provides
in addition to generating issuers or investments social investor that It develops commercial- financial services
better financial results. with the sustainable provides funding to scale solar energy including mortgage,
It focuses on investing in capacity to deliver a the microfinance installations and commercial and
global companies that are positive social and/or sector, fair trade provides a pathway individual lending
leaders in areas including environmental impact organizations, for citizens to invest to over 12,000
renewable energy, energy alongside competitive co-operatives and in solar power. Aboriginal and non-
efficiency, water and waste returns, spanning small- to medium- Aboriginal customers.
management, low- and a diverse range of size enterprises.
negative-impact products, securities, including
and sustainable agriculture, corporate bonds,
as well as access to government bonds,
healthcare, education preferred shares,
and technology. commercial mortgages
and private debt.
Impacts in energy and Impacts across Impacts in energy Impact in energy Impact in social
environment, health four broad themes, and environment and environment: inclusion: SDGs
and wellness, work and including climate and social SDGs including including no
learning, and social change, health and inclusion: sustainable cities and poverty, reduced
inclusion: multiple wellness, education SDGs including communities, climate income inequalities,
Sustainable Development and community no poverty, action, and responsible sustainable cities
Goals (SDGs) development: zero hunger, consumption and and communities,
multiple SDGs gender equality, production and decent work and
Metrics: Measured
affordable and Metrics: Greenhouse economic growth
according to revenue from Metrics: Multiple
clean energy, and gas and CO2 emission Metrics: Number of
products and services that
decent work and reductions, MW of customers, number of
align with the UN’s SDGs.
economic growth solar energy houses financed and
Metrics: Number number of businesses
of MFI clients (total, supported
female, rural),
number of social
enterprises and
employment
Risk-adjusted Risk-adjusted
Market rate Market rate Below market
market rate market rate
Cash equivalent/
Public equity Fixed income Private debt Private equity
Fixed income
NB: Categorized according to: 1. Description / Intention; 2. Impact; 3. Return profile; 4. Asset class
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 10What is the size of the impact Impact investors report that • I n
a 2017 global study of impact
the relative performances of their asset owners seeking market-rate
investment market?
impact investments are meeting returns by the GIIN, average gross
There are billions of dollars in assets or exceeding their expectations. return expectations for debt were
dedicated to impact in Canada •A
ccording 7% in developed markets and 9.2%
to a recent RIA Canada
and around the world. In Canada, in emerging markets. For equity,
survey of asset owners and asset
the impact investing market was $9.2 average gross return expectations
managers, 65% of survey respondents
billion in 2015.3 Around the world, there were 13.4% in developed markets
target competitive returns at or above
were $135 billion in assets dedicated and 16.5% in emerging markets.19
market rate, an increased percentage
to impact investing that same year.4
from its last survey.15 Of that group, Moreover, the financial performance
As of 2017, roughly 200 of the top
96% said their impact investment’s of public impact equity has been shown
global impact investing organizations
performance either met or exceeded to perform in line with or better than
managed nearly $114 billion in total
their expectations. traditional public equity. (see FIGURE 1)
assets.5 That number doubled to nearly
$228 billion in total assets in 2018.6 •A
ccording to the GIIN’s 2017 global
Annual Impact Investor Survey of
The impact investing market is
asset owners and managers, 90%
growing and it is projected to have
of investors reported that their
continued growth. There was $22
investments were meeting or
billion in new capital committed globally
exceeding their expectations.16
in 2016. By 2020, it is projected that
the global impact investing market The actual performance of impact
will be over $300 billion.7 investments has also demonstrated
Trillions of dollars will be seeking strong returns.
social, environmental and financial 2015, the Wharton School at the
• I n
performance over the next decade. University of Pennsylvania analyzed
The world’s largest investors, like 53 impact private equity funds,
BlackRock,8 and the largest pension assessing 170 underlying investments 3. RIA Canada. Canadian Impact Investment Trends Report
2016. October 2016. Retrieved from: https://www.riacanada.
funds, like CalPERS,9 have identified designed to seek market-rate returns ca/impact-trends/ 4. Markets and Markets. Impact Investing
Market by Illustrative Sector. July 2017. Retrieved from: https://
the long-term risk of investing without (from 2000 to 2014). These www.prnewswire.com/news-releases/impact-investing-market-
considering the impact on society, investments produced a 12.94% worth-307-billion-usd-by-2020-633853493.html 5. Global
Impact Investing Network. Annual Impact Investor Survey
workers and the environment. internal rate of return, near identical 2017. May 2017. Retrieved from: https://thegiin.org/assets/
GIIN_AnnualImpactInvestorSurvey_2017_Web_Final.pdf
performance to the study’s selected 6. Global Impact Investing Network. Annual Impact Investor
What is the performance benchmark, a spliced Russell Survey 2018. May 2018. Retrieved from: https://thegiin.org/
assets/2018_GIIN_Annual_Impact_Investor_Survey_webfile.
of the impact Microcap/Russell 2000 index.17 pdf Ibid. 7. Ibid. 8. BlackRock. Focus on Society and Profits
Shareholder Letter. Jan 2018. Retrieved from: https://www.
investment market? •F
rom 2000 to 2010, the International blackrock.com/corporate/investor-relations/larry-fink-
chairmans-letter 9. CalPERS. Sustainable Investing. Jan
Finance Corporation invested 2018. Retrieved from: https://www.calpers.ca.gov/page/
Study after study, conducted by investments/governance/sustainable-investing 10. CNBC. The
$2 billion in 124 emerging market
organizations ranging from Morningstar truth is finally starting to emerge about socially responsible
private-equity funds. In aggregate, investing. June 16, 2017. 11. Clark, Gordon, Andreas Feiner,
to the University of Oxford, and in and Michael Viehs. From the Stockholder to the Stakeholder.
these funds achieved an internal March 2015. 12. USSIF. Performance and SRI. As found on
countries including the United States, https://www.ussif.org/performance. 13. Australian Ethical.
rate of return of 19.7%, outperforming
Australia and Canada, demonstrates “Making a case for ethical investment.” The Guardian. January
benchmark returns of 14.2%.18 22, 2018. 14. RIA Canada. RI Performance Myth. As found
the fact that companies that support on: https://www.riacanada.ca/ri-and-performance/. 15. RIA
their workers, their community and Canada. Canadian Impact Investment Trends Report 2016.
16. Global Impact Investing Network. Annual Impact Investor
the environment achieve financial Survey 2017. May 2017. Retrieved from: https://thegiin.org/
assets/GIIN_AnnualImpactInvestorSurvey_2017_Web_Final.
performance that is equal to or better pdf 17. Wharton School at the University of Pennsylvania.
than their counterparts.10, 11, 12, 13, 14 Great Expectations: Mission Preservation and Financial
Performance in Impact Investing. September 2016. Retrieved
from: https://socialimpact.wharton.upenn.edu/wp-content/
uploads/2016/09/Great-Expectations-Mission-Preservation-
and-Financial-Performance-in-Impact-Investing.pdf
18. International Finance Corporation. The Case for Emerging
Market Private Equity. February 2013. 19. Global Impact
Investing Network. Annual Impact Investor Survey 2017.
May 2017. Retrieved from: https://thegiin.org/assets/GIIN_
AnnualImpactInvestorSurvey_2017_Web_Final.pdf
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 11FIGURE 1: Traditional Index According to a 2016 report by the By determining interest and activity
Performance vs. Sustainable Canadian Securities Institute and in impact investing among HNWIs in
Index Performance in 2017 20 Investor Economics, 5% of households Canada, we can gauge the potential
in Canada are currently considered to for market growth, inform the future
be high net worth, meaning they have strategies and activities of Canadian
TRADITIONAL at least $1 million to invest. By 2022 this financial institutions and financial
MSCI ACWI Index
number will grow to 7% of households. services firms, and provide valuable
6.91
Combined, those households will control insights for the current market of impact
% 66% of all of the wealth in Canada. By issuers, investors and intermediaries.
2024, the total assets of the high net
worth households in the country are
expected to be $4.3 trillion or 69.5%
YTD Return
of total person wealth.21
2.43% 20.99 Moreover, HNWIs are often
Divided Yield PiE Ratio
the first movers in making impact
investments, and they have capital
available for taking new and novel
VS approaches to investing.
Investment leaders such as Sir Ronald
Cohen in the United Kingdom and Bill
SUSTAINABLE Young in Canada, and networks of
MSCI ACWI Low Carbon
Target Index high net worth impact investors such
as Toniic and ImPact Network in the
7.24
% United States, have been critical to
the development and momentum
of the impact investment marketplace.
In other countries and around the
YTD Return
world, there has been demonstrated
2.42% 20.59 interest and activity in impact
Divided Yield PiE Ratio investing among HNWIs.
• A
ccording to the Morgan Stanley
Institute for Sustainable Investing’s
2017 survey of one thousand individual
It is clear that it is a great idea for investors, 75% reported an interest
both your pocketbook (or retirement in impact investing. Further, 86% of
savings) and the planet to invest for millennials reported an interest in
positive impact. impact investing.22
20. BlackRock data sourced from MSCI as of 03/31/2017.
• According to a recent survey by
Why is it important to Disclaimer: Index returns are for illustrative purposes only.
U.S. Trust, 45% of all high net worth Index returns do not reflect any management fees, transaction
understand the investment investors in the United States
costs or expenses. Indexes are unmanaged and one cannot
invest directly in an index. Past performance does not
interests and activities of either own impact investments guarantee future results. Index returns do not represent
actual fund performance. For actual fund performance,
Canadian HNWIs? or are interested in adding them please see the BlackRock product list or iShares product
list. 21. National Bank. Boomers leading rise in high net
to their portfolios.23 worth Canadians. September 23, 2016. Retrieved from:
Canadian HNWIs hold a significant https://ideas.nationalbank.ca/boomers-leading-rise-in-
and growing portion of total • In 2016, according to Capgemini, high-net-worth-canadians/ 22. Morgan Stanley Institute for
Sustainable Investing. Sustainable Signals: New Data from
capital in Canada, which could 92% of HNWIs ascribed some level the Individual Investor. August 2017. Retrieved from: http://
be dedicated to tackling social of importance to driving social impact, www.morganstanley.com/pub/content/dam/msdotcom/ideas/
sustainable-signals/pdf/Sustainable_Signals_Whitepaper.
and environmental problems. with 60% of HNWIs reporting that it pdf 23. US Trust. U.S. Trust Insights on Wealth and Worth.
June 2017. Retrieved from: https://www.ustrust.com/articles/
was extremely or very important.24 insights-on-wealth-and-worth-2017.html 24. Capgemini.
Top Ten Trends in Wealth Management in 2016. 2016.
Retrieved from: https://www.capgemini.com/wp-content/
uploads/2017/07/wealth_management_trends_2016.pdf
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 12Methodology
This report includes data collected themselves as individual investors, not
from Canadian HNWIs through an as representatives for the whole of an
anonymous online survey distributed organization or fund.
to investor and partner networks of SVX Seven investors were interviewed in-
in the fall of 2017. The organizations person on a voluntary basis to provide
that received the survey included further personal insights into the survey
impact investing networks, financial responses and their previous investing
institutions and financial advisors. experiences as a whole. Notable quotes,
The survey was limited to Canadian comments and personal experiences are
investors who were randomly selected. shared in the report under anonymity
The 21-question survey was based to respect individual information.
on similar tools employed in the United This report does not encapsulate
States and was designed to gain an the estimates of the overall trends of
understanding of the overall profiles, impact investing or HNWIs in Canada.
interests, activities, and barriers and The analysis provided here is based
levers of HNWIs as they relate to only on a collected sample by SVX
impact investing. The findings in the and is intended to provide an
following report are subjective to informative snapshot.
the information of respondents at
the time the survey was completed.
The survey consisted of a combination of
multiple choice and multi-select forms
of questioning. Free-form text response
questions were not prominently featured.
Data analysis of the survey results
included analysis based on the entire
cohort, as well as breakdowns based on
demographic and institutional factors.
All respondents represented
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 13Research
Limitations
Variance in completion rates may be attributed to simply reflect sourced from financial institutions
across the whole of the survey the market makeup of the HNWI where there is a far lower likelihood
Due to fatigue, loss of interest or population in Canada, explaining of prior connection with or knowledge
other factors, select respondents why some demographic groups are of impact investing.
did not complete all of the questions featured more heavily in the survey
of the survey, leaving latter questions respondent than others. Unavoidable bias
unanswered. There were also With all survey research, certain biases
respondents who selected specific Source of respondents are always present and unavoidable.
questions to answer and left other The survey respondents were enlisted Respondents may interpret the phrasing
questions blank. Respondents who mostly from financial institutions, of questions and answers differently
completed less than 25% of the survey investment advisors, with some than intended by the surveyors. The
were removed from the results. Overall, respondents from impact investing ordering of multiple-choice answers
71% of respondents completed all networks and mission-aligned may also influence respondents’
survey questions and 79% completed organizations. We did not wish to answers, due to either the recency
at least half of the survey. survey exclusively from SVX channels or primary effect.
which more strongly draw from early
Imbalance of demographic adopters of impact investing. Although
in respondents the makeup of the HNWIs who
Certain demographic factors were responded from each of the separate
not evenly represented among all distribution channels was random,
survey respondents. Distinguishable the respondent segment may not
identifiers, such as individuals’ gender, statistically represent the general
total net worth, age group and self- population of all HNWIs in Canada.
reflected investing experiences, did There may yet be overweighting of
not reflect an even distribution, as impact investors in the sample,
certain cohorts were more prevalent based on their willingness to respond
in the respondents. Less-represented to such a survey. At various points
demographic groups were more likely in this report, analysis was completed
to be influenced by outliers. The to compare HNWIs from impact
imbalance of demographic factors investing networks with general HNWIs
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 14Demographics
A total of 277 Canadian HNWIs
responded to the survey. Of those
respondents, 70 investors reported FIGURE 2: Age of all survey respondents (n=277)
that they are impact investors, having
previously made investments 75 years of age of older 11.2%
based on impact.
65-74 25.3%
Primary location
Most provinces and territories were 55-64 35.0%
represented in the survey, with the
40-54 22.7%
exception of the Yukon, Nunavut,
Northwest Territories and Prince
25-39 5.8%
Edward Island. The provinces with the
most prominent number of respondents 0% 10% 20% 30% 40%
were Ontario (42.6%), Quebec (32.1%),
British Columbia (13.7%) and Alberta
(7.2%). The total number of respondents
from other provinces accounted for
less than 5% of all respondents.
Age
Respondents ages 55 to 64 were the
most heavily represented cohort at
35%. No investors below the age of
25 responded to the survey.
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 15Gender FIGURE 3: Total investible assets of survey respondents (n=272)
Respondents mostly identified as male,
with 74.6% identifying as male and 23.2% Over $50 million 1.8%
as female. Five respondents preferred
not to disclose their gender identity. $25 - 50 million 1.5%
Total investible assets $10 - 25 million 4.4%
Almost half of all respondents classified
$5 - 9.99 million 13.1%
their total investible assets in the
$1 to $2.99 million range. Not many
$3 - 4.99 million 11.7%
ultra high net worth individuals
responded to the survey; only 3.3%
$1 - 2.99 million 46.4%
of all respondents indicated they had
total investible assets of over $25 million 13.9%
$500,000 - $999,999
(9 individuals total). (see FIGURE 3)
Less than $500,000 7.3%
Personal investment
experience (self-reported) 0% 10% 20% 30% 40% 50%
Under a normal distribution, more
than half of all respondents (52.2%)
reported having an average level of
investment experience, 21% reported
having extensive investment experience
and 19.9% indicated they were limited
in investment experience. It should be
noted that this question was filled under
the discretion of the respondent.
Further, 6.18% of respondents identified
as investment professionals and only
0.72% said they had no prior
investment experience.
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 16Survey
Findings
Interest levels FIGURE 4: Canadian HNWIs’ interest levels in impact investing (n=216)
Of the responses received pertaining to
overall interest level in impact investing, 10.2%
almost 90% of all respondents indicated Not at all
interested
having an interest in impact investing.
Further, 50% of investors indicated
concrete levels of interest beyond being
only somewhat interested. Respondents 25%
sourced from financial institution clients Very
had similar results, with 84.4% showing Interested
interest in impact investments, while
15.7% reported they were very interested
39.8%
in opportunities to invest based on Somewhat
social and environmental impact. interested
This finding mirrors the general trend
in the investor population, as more
and more investors are becoming aware 25%
of and interested in the benefits that Interested
can be provided by impact investing
strategies. The amount of total impact
investment assets in the United States amount of responses in the interested The millennial generation has been
experienced a 33% increase over two or very interested categories at 61.6%, shown to be a significant factor in
years from 2014,25 while Canadian higher than any other age group. Further, driving the growth of sustainable
research indicated a 123% increase in there is a distinct trend of decreasing investment choices, with Morgan
total impact investment assets under interest in impact investing as age Stanley finding that millennials are
management over two years from 2013.26 increases. This trend may be due twice as likely to pursue investing
to a variety of factors—for example,
Younger investors are more likely to be
older investors may begin to factor 25. US SIF. Report on US Sustainable, Responsible and Impact
keenly interested in impact investing. Investing Trends 2016. Retrieved from: https://www.ussif.
in retirement options in their org/files/SIF_Trends_16_Executive_Summary(1).pdf 26. RIA
Investors ages 25 to 39 had the highest Canada. Canadian Impact Investment Trends Report 2016.
investment decisions.
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 17options with social or environmental FIGURE 5: Interest in impact investing based on investor age (n=216)
targets when compared to the general
investing population.27 18.5%
75 year of age
or older
18.5%
We are also currently in the midst of
44.4%
the largest wealth transfer in history
18.5%
between baby boomers and millennials/
Generation X, as a projected $30 trillion
16.7%
will be passed down globally. Combined
29.2%
65 - 74
with the overwhelming interest in impact
investing from younger HNWIs, this 41.7%
presents an unprecedented opportunity 12.5%
for the emergence of impact investing
strategies, especially as millennials age 23.8%
and become more prominent in the 55 - 64 27.5%
investor community. (see FIGURE 5) 40.0%
8.8%
Looking at the gender breakdown of
impact investing interest, female HNWIs
35.4%
have a slightly stronger level of being
40 - 54
20.8%
somewhat interested in impact investing
compared to males: 91.8% of female 37.5%
respondents indicated being at least 6.3%
somewhat interested in impact investing,
38.5%
compared to 89.0% of male respondents.
23.1%
25 - 39
Further, 61.7% of female respondents
are either interested or very interested 30.8%
in impact investing, compared to only 7.7%
43.3% of male respondents.
0% 10% 20% 30% 40% 50%
Distinguishing a clear trend in investors’
interest levels based on their total
●V
ery interested
investible assets is slightly more difficult.
● Interested
Albeit a small sample size, ultra high
net worth individuals (those with ● Somewhat interested
investible assets of over $25 million) ● Not at all interested
showed a very strong interest in pursuing
impact investing. Interestingly, those at
either end of the total asset spectrum
showed the greatest interest in impact
investing, as investors with less than
$500,000 and more than $10 million
in total investible assets were the highest
numbers of respondents who were
either interested or very interested.
This indicates that, in general, retail
investors, along with individuals in
the upper ranges of HNWIs, expressed
the most interest in impact investing.
27. Morgan Stanley Institute for Sustainable Investing.
Sustainable Signals: New Data from the Individual Investor.
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 18Geographically, Ontario investors have FIGURE 6: Interest in impact investing based on HNWIs’ total investible assets (n=216)
the greatest overall interest in impact
investing, with 93.9% being at least 80.0%
Over $50
somewhat interested and 48% being million 20.0%
either interested or very interested.
Investors from British Columbia have $25 - 50
the most concrete amount of interest, million 100.0%
with 58.1% either interested or very
interested, the highest percentage 27.3%
$10 - 25 36.4%
across the most prominent provinces million 18.2%
18.2%
surveyed. Quebec investors also show
very high levels of interest in impact 36.7%
$5 - 9.99 16.7%
investing but, comparatively, are slightly million 43.3%
less inclined, with 55.8% of respondents 3.3%
either interested or very interested. 21.4%
$3 - 4.99 42.9%
Investors are clearly very interested in million 28.6%
7.1%
impact investing and what it can offer
17.9%
their portfolios. Many investors have $1 - 2.99 25.3%
already begun integrating impact into million 45.3%
11.6%
their portfolio and are looking to do
13.8%
more. 33.5% of all survey respondents $500,000 24.1%
have already invested with impact, with - 999,999 44.8%
17.2%
a further 19.1% of investors currently
considering options. Even within the 46.2%
Less than 15.4%
control group of investors sourced from $500,000 30.8%
7.7%
financial institutions, impact investment
activity was relatively high: 24.1% of 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
these HNWI investors reported that
they had invested for impact, along
●V
ery interested
with an additional 20.6% investigating
● Interested
impact options.
● Somewhat interested
HNWIs are also likely to begin increasing ● Not at all interested
their allocation of assets toward impact
investing in the near future. The survey
results indicate that 47.8% of total
investors are likely to increase asset FIGURE 7: Investors plan to allocate assets toward impact investments
allocation to impact investing in in the next year (n=213)
the next year by at least 1% of all 6.6%
investments or more. ● Increase the asset allocation to impact
10.8% investing by more than 10% of all investments
There is a similar display level of ● Increase the asset allocation to impact
actionable interest in clients of investing by 5-10% of all investments
financial institutions, with 47.1% of ● Increase the asset allocation to impact
all interested institutional investors 12.2% investing by 3-5% of all investments
planning to increase their impact ● Increase the asset allocation to impact
investing by 1-3% of all investments
investing allocation in the next year.
● Increase the asset allocation to impact
Along with substantial interest, HNWIs 11.3% investing by up to 1% of all investments
in Canada are ready to act on their 52.1%
● Makes no changes
interest in impact investments in the 7.0%
near future. (see FIGURE 7)
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 19Diving deeper into more general FIGURE 8: Percentage of assets of different asset classes investors are willing to invest
investment interests, the survey results in impact investments (n=186)
show that, in the presence of the various
types of asset classes and investment 6.5%
(private debt and
private equity)
Alternatives
products on offer, major interests lay 6.0%
within the following order: 1) public 11.9%
equity; 2) direct private equities; 43.5%
3) impact ETFs; and 4) green bonds. 32.1%
Public debt investments, either direct
or via funds, are not of significant 6.9%
interest to the survey respondents. 4.0%
income
The main sectors of interest are
Fixed
16.0%
enterprises focusing on energy and
42.3%
the environment, including cleantech,
30.9%
followed closely by enterprises in the
health and wellness sector.
6.8%
6.8%
Portfolio strategies
equities
Public
13.1%
and tool usage 56.3%
Diving deeper into how HNWIs manage 17.0%
their capital, we asked the respondents
what percentage of different asset 8.6%
classes they would be willing to direct 1.1%
portfolio
Entire
toward impact investing. 15.6%
The results indicate that 48.1% of 50.5%
respondents are willing to move 24.2%
up to 10% of their investible assets 0% 10% 20% 30% 40% 50% 60%
toward investing options with
beneficial social or environmental
returns. Further, 14.2% are open to ● More than 50% of investible assets
allocating up to 25% of their investible ● 25 - 49% of investible assets
assets toward impact investing, and ● 10 - 24% of investible assets
4.4% are willing to allocate up to 50% ● 0 - 9% of investible assets
of their assets. Interestingly, even more ● 0% of investible assets
respondents (7.2%) are willing to invest
more than 50% of their total assets in
impact options. Of this group, 31.4%
would do so with their entire portfolio.
Public equities is the asset class that
most investors would potentially use
to invest in impact options; only 17.0%
of respondents would not move any
assets of this type toward impact
investing. Most respondents would
also utilize their entire portfolio toward
impact investing, with 75.8% indicating
they would be willing to allocate a
percentage of their entire portfolio
with social/environmental returns
in mind alongside financial returns.
(see FIGURE 8)
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 20In terms of impact investing FIGURE 9: Investors’ interests in impact investing through various channels (n=215)
opportunities, there are several avenues
investors can utilize to manage their
I would be interested in making
portfolios, including specialized boutique 21.6%
investments on my own.
impact investing firms and established
financial institutions or advisors. Of the
total respondents, 51.5% are interested
I would be interested in impact
in impact investing opportunities investment opportunities from
15.5%
available through their financial both my institution or advisor
and specialized firms.
institutions or advisors. Further, 11.3%
are interested in exploring opportunities
through specialized impact investing I would be interested in impact
investment opportunities through
firms and platforms, while 15.5% are specialized impact investing
11.3%
interested in utilizing both specialized firms and platforms.
firms and financial institutions.
Additionally, 21.6% indicated they are
I would be interested in impact
most likely to explore impact investing investment opportunities
51.5%
on their own. (see FIGURE 9) available through my financial
institution of my financial advisor.
Older HNWIs have an increased
0% 10% 20% 30% 40% 50% 60%
likelihood to invest in impact options
via their financial institutions.
Interestingly, only 25% of respondents
between the ages of 25 and 39 would
pursue impact investments through
their financial institutions, compared to companies, while 28.9% prefer growth Reporting and Investment Standards)
81.8% of HNWIs ages 75 years and older. and scaling companies, and 27.2% prefer (26.7%); standard frameworks and
seed- and early-stage investments, assessments such as GIIRS, GRI and
Current clients of financial
such as low-revenue startups. SASB (14.7%); and proprietary metrics
institutions show an even stronger
disposition toward exploring and/or frameworks that are not aligned
impact investing opportunities “Working with startups and with any external methodologies
with their current advisors, with private offerings gives me (14.7%). Of the respondents, 13.3%
73.2% preferring this option. A further also indicated they did not measure
opportunities that provide
11% are interested in a combination social or environmental performance
more clarity and hands-on in their impact investments. Monitoring
of utilizing specialized firms alongside
their financial institutions in considering involvement… It’s all about and identifying impact metrics are
impact investing options. the story.” crucially important activities when
- Investor B investing responsibly and today’s
“If [financial institutions] are investors are becoming increasingly
A crucial aspect of impact investing
aware of this need.
willing to enter this market is the performance of measuring
and are fully prepared, the potential impact an investment
“I’m [always] looking for
may have, both in the short and long
then I say bring them on.” more than I’m getting in
term. There are a variety of strategies
- Investor A
investors can apply in this area, and terms of metrics of impact
Impact investing offers diverse 53.3% of the survey respondents who
opportunities for potential investors,
performance.”
have reviewed impact options indicate
especially ventures at different stages of - Investor C
they do so through written qualitative
growth. According to the survey results,
reports. Other measurement options
43.9% of HNWIs are most comfortable
include: metrics aligned with industry
investing in mature publicly traded
standards, such as the IRIS (Impact
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 21Perception of performance FIGURE 10: Amount of risk investors would be willing to undertake in their portfolio to
increase impact investment abilities (n=215)
and risks
In terms of potential risks that may be I would be willing to take a lot
taken on during the impact investment more risk with my entire portfolio
1.4%
to achieve greater social and/or
process, 59.5% of all respondents environmental impact.
are willing to take on at least a little
additional risk with a portion of their
I would be willing to take a lot
portfolios. Risk here is defined as more risk with some of my portfolio
7.0%
potential financial losses that may to achieve greater social and/or
environmental impact.
result from frontier region investments,
early-stage venture risks or industry-
specific factors that can arise from I would be willing to take a little
more risk with my entire portfolio 9.8%
impact investing opportunities. to achieve greater social and/or
(see FIGURE 10) environmental impact.
Female investors are more willing to
take on additional risk; only 30.6% of all I would be willing to take a little
more risk with some of my portfolio
female respondents indicated they are to achieve greater social and/or 41.4%
unlikely to take on any additional risk for environmental impact.
impact investing, compared to 44.2%
of male respondents. Younger investors
I would be unlikely to take more
are more likely to explore riskier options, risk to achieve greater social 40.5%
with 30.8% of respondents ages 25 to 39 and/or environmental impact.
prepared to take on a lot more risk with
0% 10% 20% 30% 40% 50%
a portion of their portfolio to facilitate
impact investing.
It is also worth noting that investors FIGURE 11: How much high net worth investors would be willing to pay in additional fees
who show greater interest in impact to facilitate impact investments (n=208)
investments are much less risk
6.7%
averse: 46.5% of somewhat interested
respondents indicated they are open 13.9%
to taking at least a little bit of risk,
compared to 79.2% of interested ● More than 50 bps (over 0.5%)
respondents and 84.3% of very ● 25 - 50 bps (0.25 - 0.5%)
interested respondents. ● 0 - 25 bps (0 - 0.25%)
In some cases, certain impact investing ● I would not pay additional fees
opportunities may come with additional
fees to account for all-comprehensive
due diligence, management services 27.9%
51.4%
and additional metric certifications.
Additional fees are defined as fees
that are over and above the average
investment management expense fees
(approximately 2%). (see FIGURE 11)
The survey results indicate that 48.6%
of all respondents are open to potential
additional fees in the pursuit of impact
investing opportunities. Female
respondents are slightly more open to
these fees, with 53.2% indicating they
are willing to pay additional fees if
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 22necessary, compared to 47.5% of FIGURE 12: Biggest barriers to impact investing as selected by HNWIs (n=186)
male respondents. More than 1 in
17.4%
Very significant
3 respondents (42.4%) who indicated 21.3%
challenge
they would be likely to pursue impact 19.4%
investing through their financial 11.6%
16.8%
institutions and advisors are also 8.4%
open to paying additional fees.
Again, as investors’ interest levels 11.6%
19.5%
Significant
challenge
increase, they are more likely to be 20.1%
open to paying the increased fees 6.8%
associated with impact investments. 20.3%
19.9%
One in three respondents (33.5%) who
are only somewhat interested in impact 18.0%
challenge
investing are willing to pay additional Modest 13.5%
15.6%
fees for impact investing if required.
13.2%
Current clients of financial 19.6%
19.6%
institutions are also willing to
undertake more risk and pay 17.4%
additional fees to accommodate 13.4%
challenge
Not a
10.9%
for impact investing options in 34.4%
their portfolios. More than half of 8.3%
these respondents (50.7%) indicated 13.0%
they are willing to take on additional 0% 10% 20% 30% 40% 50%
risks to achieve greater social and/or
environmental impact. Likewise, 37.1%
of current financial institution clients ● Lack of liquidity ● Lack of RRSP and/or TFSA eligibility
are open to paying additional fees in ●L
ack of qualified advice and expertise ● Perceived financial performance
of impact investments
relation to impact investing. ●L
ack of viable products and
investment options ● Perceived risk of impact investments
These findings suggest a clear
emergence of a select group of investors
within this cohort who are very open
line with their expected returns or The most common issue to be deemed
to the potentials of impact investing.
have even exceeded their financial a very significant challenge (at 21.3%)
Clients are clearly interested in the
targets (excluding investments that is the lack of qualified advice and
prospect of adding impact investment respondents have deemed to have expertise about impact investments. The
options to their portfolios in the near uncertain performance at the time lack of viable products and investment
future, and are also willing to accept of survey completion). This shows options and the lack of liquidity in impact
additional risk management and fees that most impact investors understand investments are the other issues
in the process. This particular set of the unique profile of impact investing, perceived as barriers by respondents,
clients has a specific set of needs that yet still expect a competitive return at 19.4% and 17.4% respectively.
need to be met, needs that arise from and are largely getting it or even
The not-a-challenge option that was
opportunities they would like to pursue exceeding their expectations.
selected the least by respondents
with their current institutions. was the issue of perceived financial
Of the clients that currently have Market outlook: performance of impact investments,
committed capital toward impact Barriers and levers suggesting that this is also perceived
investing options, a large majority as a strong barrier by Canadian HNWIs.
It is clear from the survey findings Other popular responses highlighted
indicated a preference toward either
that there is a high level of general the length of time required to research,
market or risk-adjusted returns. Of
interest in impact investing options analyze and undertake due diligence
these clients, 40% have targeted market-
among Canadian HNWIs. However, of impact investment opportunities,
rate returns, with 43.2% targeting risk-
there are still certain barriers that as well as the investor’s own lack of
adjusted rate returns. Further, 75.2% of
are preventing potential investors from knowledge and understanding, leading
these investors also indicated that their
making any or additional investments to unfamiliarity with impact investing
impact investments have either been in
in the field. as a whole. (see FIGURE 12)
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 23Identifying the major levers that FIGURE 13: Levers likely to increase an investor’s likelihood to invest in impact options
can motivate previously unconverted in the future (n=185)
investors to making steps toward impact
investing is paramount in continuing the
growth of responsible and sustainable Very 16.2%
significant 22.9%
investments. Unsurprisingly, the factors
increase in 19.0%
that are most likely to increase an likelihood 15.2%
investor’s likelihood to invest in social to invest 26.7%
or environmental impact opportunities
17.4%
resonate with the common barriers Significant 21.0%
increase in
previously identified. likelihood
19.7%
21.0%
to invest
The strongest factor that would 21.0%
result in a very significant increase
22.5%
in the likelihood to invest, at 26.7%, Modest 19.6%
is having more persuasive evidence increase in 21.5%
likelihood
to demonstrate positive financial 19.6%
to invest
16.7%
performance. An increased supply
of impact investment products 21.1%
17.3%
(22.9%) and better expertise on impact
No change 18.3%
investing among investment advisors 22.6%
and professionals (19.0%) were also 20.7%
strong factors that are likely to 0% 10% 20% 30% 40% 50%
significantly increase the likelihood
of investors pursuing impact investing.
These two factors were also the least ●G
reater adoption of standardized ● Easier access to high impact
environmental and social reporting investment opportunities
selected options among factors that guidelines (such as IRIS, SDGs or GRI)
● More persuasive evidence to demonstrate
would not inspire any change toward
● Increased supply of impact positive financial performance
impact investing, suggesting that these investment products
were levers that were more likely to ●B
etter expertise on impact investing
instill any amount of change in investor among investment advisors
and professionals
behaviours. (see FIGURE 13)
Taking a closer look at current clients
of financial institutions, 23.1% of
respondents indicated that having more
persuasive evidence to demonstrate
positive financial performance and
the greater adoption of standardized
environmental and social reporting
guidelines were the two strongest levers
with significant likelihood to encourage
future impact investments. Better
expertise on impact investing among
investment advisors and professionals
was also shown to be the factor most
likely to increase the likelihood to
invest for investors, as it was the
lowest selected option under factors
likely to instill minimal changes in
investment strategy.
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 24Looking
Forward
What does this mean for For the ecosystem to respond and aid responding that they are “very
in the growth of the impact investing interested” in impact investing on
the market? What can
market, information is needed to show the survey. These respondents paint
stakeholders do? the movement in investor behaviours and a strong picture of who might be among
To our knowledge, this is the first survey interests. While several other avenues the early adopters of current or future
on impact investing to have an exclusive remain to be fully explored, we believe impact investing offerings should they
focus on Canadian HNWI investors. that several findings from this report will be presented with the opportunity.
It is clear that the interest in exploring resonate with various stakeholders and
Leading-edge impact investors are
investment options that can have a will help them to take the next steps on
likely to be found among women in the
positive social and/or environmental their impact investing journeys.
25 to 39 (38.5%) or 40 to 54 (35.4%)
impact is at an all-time high. More than age range. Their top five sectors
ever, investors are looking to make Beachhead market of investment interest in order of
investments that reflect their own preference are: 1) energy and the
Before outlining recommendations,
personal values and issues that are environment; 2) health and wellness;
it is especially relevant for the market
close to their heart, while also achieving 3) sustainable food; 4) education; and
to understand that there is a beachhead
competitive market-rate returns. 5) social inclusion. These women are
market of interested and active impact
Investors are already beginning to investors. Having a better understanding looking at portfolio-wide strategies and
take action and plan for a future in of this segment can inform investors in are willing to take on a little more risk
which impact investing will have an their efforts to self-organize, institutions to start to execute on these strategies,
important presence in investment in the development of their business starting with individual public equities,
portfolios. Although investors are strategies, and ventures and funds direct private equity, impact ETFs and
seeking competitive or even above- in seeking capital. green bonds, followed by public equity
average returns, most recognize the funds. These leading investors are likely
As previously mentioned, we found that
need for compromise, specifically to be ultra high net worth individuals,
a staggering 89.8% of all respondents,
in higher risk profiles, as well as in as 100% of respondents with $25 to
across all demographic characteristics,
potential additional management $50 million in assets—and 80% of
indicated an interest in impact investing.
fees. With the support of the respondents with over $50 million
We also reviewed the survey results for
industry, investors are ready to bring in assets—indicated they are very
the respondents who had the highest
impact investing to the forefront interested in impact investing.
degree of interest, articulated by
of the capital world.
Market Momentum: Impact Investing & High Net Worth Canadians | MaRS Discovery District 25You can also read
