News | Investors put their money where their values are
May 14, 2015
By Andrea Rumbaugh | Houston Chronicle
Investors increasingly are bucking the notion that making money and doing good must be mutually exclusive, seeking out profitable companies whose values align with their own.
The up-and-coming practice known as impact investing allows investors to increase their net worth while supporting for-profit companies that are working to solve the world's problems, said Christopher Knapp, CEO and co-founder of Chilton Capital Management, based in Houston.
"We're choosing the investments based on the expectation of return and profitability first," he said. "It just happens that we also care very deeply about solving the biggest problems in the world, and so we want to tie those two pieces together."
The performance largely meets or exceeds investor expectations, according to the fifth annual impact investor survey conducted by the Global Impact Investing Network and J.P. Morgan.
The survey, released last week, included responses from 145 organizations that manage a collective $60 billion in impact investments. Among the 82 survey respondents that also responded last year, there was a 7 percent increase in capital committed between 2013 and 2014 and a 13 percent growth in the number of deals.
"In recent years, people have become a lot more mindful and intentional about linking their financial decisions to their values," said Abhilash Mudaliar, research manager for the Global Impact Investing Network.
Chilton Capital, founded on traditional investment principles, ramped up its impact investing segment three years ago. Clients in this segment are invested in companies that score well on environmental, social and governance metrics. In other words, they strive to protect the environment, give back to the community and employ a quality management team that includes women, among other things.
Clients can devote all or part of their portfolio to impact investing, Knapp said.
Make money, do good
Anne Robertson became a Chilton Capital client about a year and a half ago. The 56-year-old Austin resident is passionate about children's environmental health - not exposing kids to toxins - and she wanted to invest in companies with those values and other positive practices.
"You can make money and do good," she said. "They're not mutually exclusive."
U.S. Trust helps clients invest in businesses that recycle and focus on sustainability, hire women into leadership roles, support the LGBT community, or associate strongly with a religion. It calls the practice socially innovative investing.
Paul Ehrsam, the Houston market investment director for U.S. Trust, said some Houstonians are interested in aligning portfolios with philanthropic and social activities.
Similarly, Graystone Consulting, a Morgan Stanley business focused on institutional investing, worked with Morgan Stanley's Institute for Sustainable Investing to help clients invest in roughly 100 asset management firms and mutual funds. Norman Nabhan, Houston-based managing director of Graystone, said he's seen the most local interest among health care companies, faith-based organizations and family foundations.
"They want to invest in companies that have those same goals and values," he said.
But there are challenges, including a shortage of high-quality investment opportunities with an established track record, according to the impact investor survey.
In conservative Texas, Knapp said, it's difficult to persuade backers that impact investing can match or beat prevailing market returns. Many Texans view these companies as risky, low-return investments because they have goals similar to nonprofits.
He would like to see Houston lead the nation in impact investing.
"Houston's perfectly poised to do that. We have this legacy of this can-do, entrepreneurial spirit," he said. "So I believe we're the city to lead it."