Most advisors are flying blind on how many clients have interest in investing for impact. Increasingly, that’s a business risk.
By now, most advisors recognize some of the headline trends:
- Impact investing is now a trillion-dollar market growing at more than 20% per year.
- More than 80% of millennials indicate interest in sustainable investing.
- Two-thirds of investors have never had their wealth advisor even bring up the concept.
Yet while some advisors have impact as core to their practice, others report that only a handful of clients are asking them explicitly for impact investing solutions. They see low demand, and they conclude it’s a low priority.
But that framing misses how impact demand actually behaves. It’s not loud; it’s latent. And much like an iceberg, the part you can see above the water is only a fraction of the true opportunity underneath.
One advisor I spoke with recently summed it up well: “Most of my clients are not likely to bring it up if we don’t, but I’m pretty sure many would invest if we made it easy for them.”
The two parts of the impact demand iceberg
At a typical wealth firm, demand for impact investing often acts like two parts of an iceberg:
Above the surface:
Spikes of vocal demand pop up sporadically, such as:
- A foundation adding impact to their mandate
- A wealth creator with a passion for a specific impact sector
- A next-gen conversation where impact is critical
But these are still a small minority of clients, and the firm’s leadership is left trying to figure out how much resourcing to put towards building an offering just to satisfy the needs of a handful of clients. But if you’re only responding to these explicit signals, you’ll likely end up underinvesting in a capability that serves a much broader swath of clients.
Below the surface:
In our work with over 50 private wealth and charitable institutions, we often see that the much larger interest is less visible.
- Silent departures: We frequently hear from advisors that they didn’t focus on an impact solution until a large client left unexpectedly because they felt the impact solutions were inadequate.
- Prospect themes: If you’re hearing about impact sectors — climate, diversity, housing — across multiple prospect conversations but struggling to demonstrate expertise, that’s a demand signal hiding in plain sight.
- Self-educating clients: Often clients join impact peer communities or research opportunities on their own when impact offerings are lacking at their advisor.
- Philanthropic capital sitting idle: When a firm measures the total amount of philanthropic and foundation assets that are underutilized, this gap can represent a large portion of capital that is well positioned for impact solutions.
The key takeaway for advisors: demand for impact investing often represents itself through a variety of channels. If you wait for clients to ask about impact, you’ll end up systematically underestimating it.
The cost of misreading demand
Advisors who interpret low explicit demand for impact investing as low actual demand face three business risks:
- Unexpected attrition
- Most clients are unlikely to issue a formal RFP for impact. They simply move to advisors who can meet the need, especially toward a growing set of boutique firms who build their positioning around this core capability.
- Lost share of wallet
- Philanthropic capital, donor-advised funds, and private investments increasingly sit outside traditional portfolios, where advisors do not advise on these assets.
- Missed generational transitions
- An estimated $84–90 trillion in wealth will transfer to younger generations over the coming decades — a cohort that consistently expresses almost double the interest for aligning capital with values than previous generations.
Is the market for impact waning?
One of the most frequent questions we get from wealth advisors is, “How has demand for impact changed with the current political environment?”
Answering this requires parsing some often-conflated terminology. Flows to “ESG” funds in public markets — generally baskets of dozens or hundreds of public companies across all sectors — have slowed amidst increased scrutiny, especially among institutional clients.
However, the market data and our experience at CapShift reflect that the underlying drivers of impact investing in private markets have continued to accelerate. After all, families still have their core values. And the drivers behind impact are macro generational shifts in the market — including the continued growth of philanthropic assets, deep allocations to private investments, desire for thematic solutions in portfolios, and need for personalization to meet a client’s goals.
Indeed, 90% of institutional investors cite client demand as a core driver of sustainable/impact investing, while 88% of investors globally express interest in investing for impact.
Simple steps to uncover the full landscape of client goals
You don’t need to build a fully resourced impact practice overnight. We see high growth advisors start with a few targeted steps to assess client demand for impact:
- Send a simple, short survey to clients to ask what they want. We’ve found that experimenting with different language for different client segments can help this exercise resonate more with clients.
- Incorporate impact into your proposal materials. Rather than just listing “impact”, talk about common causes or themes clients may care about (e.g. community investing, climate solutions).
- Host an educational impact event and see how many clients show up and engage.
- Equip your client-facing advisors with a few questions to bring up at their next client meeting, such as asking about what issues are driving an interest in philanthropy
In the good old days, advisors had to make an all-or-nothing decision whether to invest heavily in building out an impact capability or not supporting it at all. Those days are over.
Every advisor building for the long term should consider a few simple steps to assess their true client demand, and position themselves to take advantage of the long-term growth in investing for purpose.
The advisors who understand that demand doesn’t always announce itself are the ones building relationships that will outlast generational wealth transitions.
Adam Rein is CEO at CapShift.
Advisors’ Corner is a content partnership between ImpactAlpha and CapShift. CapShift’s impact investing platform empowers financial and philanthropic institutions — and their clients — to invest in their vision for a better tomorrow. All content is solely for informational purposes and should not be used as the basis for investment decisions.
