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Report

The Individual Imperative: Retail Impact Investing Uncovered

Impact investing has grown impressively in the past decade. In one sense, the factors driving investors have not changed. We invest to plan for the future, and we hope for a better, wealthier tomorrow. And yet, our sense of what constitutes wealth has changed, and a rapidly innovating financial services industry has responded by creating new modes and investment tools that generate social or environmental returns alongside financial ones. Early innovations in impact investing catered to accredited and institutional investors. The next frontier for impact investing lies with retail investors.

As a provider of risk capital for social good, The Rockefeller Foundation champions the research and development of financial instruments to successfully enable, accelerate, and harness retail investments for public good. We are seeing early success across the United States and Europe with retail investment products such as ESG Exchange Traded Funds, fixed income community notes, listed investment trusts, and impact mutual funds.

This report, which draws on a survey of 200 retail investors and 300 advisory firms that serve them, explores what it will take to truly democratise impact investment. What is the expected growth of the industry, what are the motivations of individual investors, how are they measuring success and what must the advisory community do to show them the way?

Key findings include:

  • Social and financial ROI in tandem: The research reflects a growing belief among retail investors that they can generate both financial and social returns from investments.
  • From awareness to action: The vast majority (78%) of retail investor respondents who are aware of impact investing state that they are currently making impact investments. Over half (55%) of those respondents expect their allocation to impact investing funds/products within their portfolios to increase to 6-20% over the next two years.
  • Bridging the perception gap: The findings highlight a disconnect between how advisors believe they are perceived by clients and the actual perspective of investors looking to gain a foothold in impact investing.
  • Guided by hearts as well as minds: Investors are driven by personal values rather than relying purely on metrics-driven returns.
  • New vehicles for capital to make impact: While appetite for impact investment is growing, there is a need to develop innovative, scalable products for the growing base of retail investors.