The Opportunity in Municipal Bonds: The Original Impact Investment
There continues to be increased demand for impactful investment solutions and an increase in the value of sustainable assets invested globally. Neighborly is a tech-powered public project finance platform, seeking positive correlation between superior investor returns and better outcomes for the world. We believe impact adoption presents the greatest opportunity to improve long term investment performance, and to support positive impact in communities around the country.
In fact, the municipal bond market is the largest community focused impact investing vehicle in the nation.
In Math We Trust
The Annual Survey of the Global Impact Investing Network showed that the size of the global impact investing market doubled in the last year, from $114 billion in assets to $228 billion. In fact, seventy-five percent of investors are interested in ESG products, with women and millennials leading the charge. Here are the key factors for the rise of ESG and impact investing worldwide:
Millennials: 77% of millennials have portfolios that include ESG and/or impact investments in their portfolio.
Women: The growing influence of women as decision makers who are focused on the social and financial outcomes of their investments. Women currently control about $14 trillion in assets. In the coming years that number will increase to a minimum of $22 trillion.
High Net Worth Individuals: 40% of high-net-worth investors surveyed by U.S. Trust either own or invest in companies with strong ESG track records.
Risk Management and Financial Return
In addition to driving world-positive impact, ESG considerations play an important role in managing risk in investment portfolios. Establishing stronger risk metrics by assessing and evaluating issuers on key ESG factors and predictive analytics can help manage volatility and drive alpha. Failure to integrate analysis of ESG factors into the investment decision-making process overlooks potential risks. Underwriting good behaviors is more likely to result in better long term outcomes.
The Original Impact Investment: The Humble Municipal Bond
The municipal bond market is the largest community focused impact investing vehicle in the nation; it funds the critical infrastructure that communities rely on every day — from schools and roads, to parks and water systems. These bonds also fund transformational, next-generation projects like community fiber broadband networks that democratize access to information, and solar microgrids so communities can establish energy independence. Municipal bonds can also contribute to a community’s “happiness factor” — the preponderance of recreational space, bicycle lanes and playing fields.
Increasingly, our communities and civic leaders are being asked to do more with less, and they are looking for fresh ideas and new technologies to solve their financing challenges. At the same time, more investors are looking to direct their money to world-positive projects.
Through the use of sophisticated technology, we can wring out the inefficiencies of the long neglected municipal bond market, leaving room to solve some of the nation’s larger infrastructure and social welfare problems. By breaking down layers of complexity and standardizing contracts and structures, we’re working to connect communities with the capital they need, when they need it, and at the best price.
