'Impact Investing' a Competitive Edge for $3.5B Wetherby Asset Management
Impact investing is having a positive impact not only on the environment and other worthy causes, but on Wetherby Asset Managements business.
About one-third of our new business inquiries are coming from people who want this, says Deb Wetherby, chief executive officer of the $3.5 billion San Francisco-based firm. Weve developed an expertise in impact investing and are attracting clients who want their portfolios to reflect their values in social and environmental change. For us, its a competitive advantage.
While the strategy, once called socially responsible investing, has been around for decades, Wetherby says she's seen interest spike over the past five years.
The 2008 financial crisis was a major catalyst, she believes: I think clients began to question what is important and meaningful in their lives. They also started to question the post-World War II assumption that consumption equaled happiness, and became more concerned about the sustainability of natural resources, she says.
FOCUS ON RETURNS
The belief that investments for social results generates sub-par returns is also diminishing, Wetherby maintains.
The old school of thought was that you have to give up returns with impact investing, she says. So if you wanted to enable social change, you should make as much money as you can using traditional means and then give away as much as you can.
But a new wave of investment funds -- such as ex-Goldman Sachs managing partner David Bloods Generation Investment Management (co-founded by Al Gore) -- and asset management firms, such as Equilibrium Capital and Imprint Capital, are demonstrating that impact investing can generate competitive returns. Theyre proving you can add value to your portfolio and still have integrity, Wetherby says.
Skeptics charge that the more limited universe of companies committed to social responsibility intrinsically reduces return expectations, and that corporations cant effectively both social and financial bottom lines.
Proponents counter that environmental and social drivers can indeed be positive for business, that reducing environmental risk is a sign of strong management and that there are growing market opportunities in areas like green tech.
Wetherby Asset Management also encourages clients to directly support socially responsible organizations like Habitat for Humanity and Root Capital, which invests in small agricultural firms in Africa and Latin America.
For example, Wetherby clients have lent money to Root Capital by buying a two-year private note that pays 2.5%. Thats a very competitive rate, Wetherby notes, and it also enables Root to turn around and re-lend the money to co-ops they work with as a bridge loan, so they can have capital between the growing season and harvest.
Clients also lend to money to Habitat, which issues notes to help finance mortgage payments, and have made equity investment in companies producing clean water and green energy.
Wetherby, which also has an office in midtown Manhattan, recently signed on a new client interested in impact investing as a result of a referral from an advisor who didnt have the requisite expertise to provide the service.
I find it amazing that more advisors arent responding to the demand, Wetherby says. Its out there.