More major mainstream investment managers are flocking to impact investments. Already, funds invested in it are well into the tens of trillions and some foundations are committing to invest their endowments in it.

Perhaps even more telling than these indicators suggesting that impact investing is heading toward the mainstream: More students are enrolled in the impact investing class of Christopher Geczy, an adjunct professor of finance at Wharton, than in his traditional investment management class. “I think we’ve reached a tipping point,” said Geczy during a panel discussion titled “Mainstreaming Impact Investing” at this year’s Social Impact Conference, sponsored by Wharton’s Social Impact Initiative.

Impact investing, the practice of taking environmental, social and governance factors into consideration in making investment decisions, refers to the full range of approaches within the category, including socially responsible investing.

The enthusiasm for Geczy’s impact investing class echoes another data point cited by panelists as an indicator of the ascendance of impact investing: According to a recent Bank of America survey, 85% of millennials are interested in, or are actively doing, impact investing.

“Given the trends in wealth transfer, and that 85% of millennials say they want to invest with purpose, an investment manager will be out of the running if they don’t offer [impact investments],” said panelist Surya Kolluri, managing director for policy and market planning at Merrill Lynch, a subsidiary of Bank of America. He also cited statistics showing that women are significantly more inclined to be interested in impact investing – 70% versus 30%, according to BoA data – and that women stand to control the majority of wealth in coming years.

“I think we’ve reached a tipping point.” –Christopher Geczy

“[Impact investing] is increasingly core,” Kolluri said.

Bank of America/Merrill Lynch is one of a number of mainstream investment managers that are offering impact investment products and advice. As of the end of 2016, Bank of America clients had more than $11.3 billion managed in a way that takes environment, social or governance (ESG) factors into account.

Other recent mainstream entrants into impact investing include BlackRock, Bain Capital and TPG Capital, which announced late last year that it was starting a $2 billion impact investment fund. Both BlackRock and Bain Capital launched impact investing units in 2015, followed shortly by the launch of a variety of impact funds.

Worldwide, some $25 trillion is invested with consideration of ESG factors, according to Geczy. In the past two years alone – from 2014 to 2016 – sustainable, responsible and impact investing (SRI) assets have grown 33% to nearly $9 trillion in the United States, according to the U.S. Forum for Sustainable and Responsible Investment (USSIF) data, noted Nick Ashburn, the panel’s moderator and senior director, impact investing for Wharton’s Social Impact Initiative.

A recent announcement by the Ford Foundation that it would gradually commit up to $1 billion of its endowment to impact investing is yet another sign of the mainstreaming of impact investing, Ashburn said. Investing endowment funds, rather than program-related funds, in impact investing is a step that few other foundations have taken. The MacArthur Foundation is one of the few others that has, he noted.

Room to Grow

Despite these developments, impact investing has room to grow. As of 2016, SRI investing represented 20% of assets under professional management in the U.S., according to the USSIF.

Regarding just the world of foundations, Liesel Pritzker Simmons, co-founder and principal of Blue Haven Initiative, a family office, and another panelist noted that it was astounding that most only allot a miniscule percentage of their assets, through program-related investments, to impact investing. “We believe every investment has an impact, whether negative or positive,” said Simmons. “We find it stunning that foundations will talk about the 1% they’re spending for impact but not talk about what the rest of their money is doing.”

More generally, there is a key phenomenon – the wide gap between interest and practice on the part of investors – that must be addressed if impact investing is to become mainstream, said Kolluri. In one of several surveys done to determine demand for impact investing products, Bank of America found that while 58% of respondents in 2016 said they were interested in SRI, up from 10% a decade earlier, far fewer said they were actually making such investments.

“That’s the gap we need to close,” said Kolluri.

Conference participants cited a number of factors contributing to this gap, including a lack of familiarity with the approach to investing, especially among financial advisors, the balkanization of SRI within financial institutions, and despite a proliferation of impact investing products, a continuing limited supply, particularly in certain categories of investments.

“We have 15,000 advisors,” Kolluri said. “Within them, there’s a huge range in their understanding of the whole area of ESG/impact investing. Some know a great deal, some know virtually nothing.”

“People change their investment behavior when something moves them. Storytelling is absolutely critical.” –Suzanne Biegel

To overcome these barriers, BoA has created an executive committee on SRI, which includes the presidents of BoA and Merrill Lynch. The bank has also committed to training all of its 15,000 advisors to be able to address SRI and to make referrals to those within their institutions who can provide impact investing advice and products.

Geczy, meanwhile, said he is working to promote impact investing among certified financial advisors and their organizations.

“I talk with 5,000 advisors a year,” he said. “There’s a huge amount of inertia in the industry. The models will need to accommodate. Somehow, there needs to be an elaboration of the three-bucket model [for retirement planning]. Maybe there could be an aspirational bucket. Perhaps the model is being expanded, but it will all take time.”

Data and ‘Storytelling’

The lack of data on the returns, particularly the ESG returns, of impact investments was another barrier cited, though the panelists said there has been some progress. Kolluri cited the metrics that the Sustainability Accounting Standards Board has developed as an important advance, but he and others said there was still much more to be done. Geczy noted that there was a significant disparity between the data available for public versus private equity investments.

Suzanne Biegel, founder of Women Effect, speaking on another panel, “Impact Investing Strategies,” described the paucity of data available to assess the impact of efforts to improve the lives of women and girls through impact investing.

It is relatively easy to get data on the numbers of women in leadership positions, she said, but it is very difficult to get other kinds of crucial data. Biegel cited practices related to the treatment and role of women in supply chains, such as human trafficking and women’s pay, and the numbers of women with access to phones that would enable them to securely receive paychecks electronically, as the kind of data that is very difficult to get — and urgently needed.

She stressed that the way to begin to get this data is for as many investment stakeholders as possible to demand it, from investors and analysts to major development organizations. She noted that once one group begins to demand data, that is likely to have a snowball effect and others will follow. In addition, new technologies are required to facilitate data collection.

While Brian Trelstad, U.S. partner for Bridges Fund Management, and others cited the importance of rigor in collecting data, panelists agreed that not all data had to meet what is often considered the highest standard, that gleaned from randomized controlled trials. In addition, impact data needs to include both negative and positive investment effects, Simmons and Geczy agreed.

And, to fully convey the impact of investments, stories and anecdotes are needed as well as quantitative data, panelists said. People are much more inclined to be moved by them than by data, said Biegel. She said she could get people’s attention far more easily by noting that the necklace she was wearing was made by survivors of human trafficking than by citing the multi-billion-dollar size of the trafficking industry.

“Impact investing is more apt to take money away from traditional investing than from philanthropy.” –Liesel Pritzker Simmons

“People change their investment behavior when something moves them,” said Biegel. “Storytelling is absolutely critical.”

Participants also pointed out the need for all kinds of financing, from philanthropic to venture capital to impact investing. Impact investing, Simmons said, was more apt to take money away from traditional investing than from philanthropy. (Blue Haven does both impact investing and philanthropy.)

Regarding the need for all forms of financing, the panel considered the case of the needs of biomedical research. “In biotech, you need philanthropy, government and VCs for the trial phase. The early stages take risk capital that is willing to be patient, said Simmons.

In advocating a “big tent” approach, Simmons added that impact investing in private and public equity is important and that investors have differing needs. For example, she cited the difference between the needs of CALSTERS (California State Teachers’ Retirement System, the second largest public pension fund in the U.S.) and family offices like hers. Geczy stressed that while private equity has a special cachet, the amount of investable assets available on the public side is many magnitudes larger, and therefore provides the opportunity to support enormous infrastructure projects — for example, a water reclamation project in India.

With respect to product availability, Simmons observed that there were limited supplies of buyouts and secondaries on the private equity side. Biegel noted that while there was a great deal of innovation underway, investors could still not get a product in any sector, with a given theme, addressing communities in every part of the world to fit all investor preferences.

While there is considerable data to indicate that impact investors need not sacrifice returns to achieve impact, it was noted that there is a persistent misperception that that is not the case, and this remains a barrier. Biegel noted that the established standards for acceptable returns were essentially “made up,” and that therefore there was no reason that those standards couldn’t be revised.