Like other robo-advisors, San Francisco-based app Grow provides automated investment advice — but unlike many of its peers, it will only make investments that meet specific ethical criteria such as social, environmental, or political impact, in addition to considering monetary return, according to TechCrunch.
Grow has developed a proprietary analytics tool to help it identify investments that adhere most closely to an investor’s requirements, while allocating across different industries and asset classes for portfolio diversification.
Socially responsible investment is a significant opportunity for robo-investors for a number of reasons:
- Sustainable investments make up 28% of all global assets under management(AUM), making it an enormous market. Global sustainableinvestment reached £14 trillion ($21.4 trillion) in 2014, according to the Global Sustainable Investment Association (GSIA). Total global AUM reached £51 trillion ($74 trillion). Meanwhile, BI Intelligence forecasts that robo-advisers will be managing £6 trillion ($8 trillion) globally by 2020 — if 28% of this were sustainable, it would equate to a market of £1.4 trillion ($2 trillion).
- It particularly appeals to a key demographic — millennials. This group is notoriously much less likely to invest as a whole, but sustainable investment products could draw them in — 67% of millennials want their investments to reflect their social, political, and environmental values. This compares to 44% of Generation X and 36% of baby boomers, according to US Trust.
But Grow will face stiff competition. Robo-advisors Motif and Earthfolio already offer products in this space — so if Grow is to succeed, it will need a unique selling point. The key to this may not be trying to differentiate its investments from other socially responsible robo-investors, but finding a way to help more millennials afford investment. Although this group is most attracted by sustainable investment, only 20% are invested in the stock market, due to financial pressures like student debt.
his points to a population passionate about sustainable investing but barred from doing so by financial pressures — if Grow can find a way to help millennials access investment, then it may have an edge. One way to do this would be to implement a micro-savings program that allows people to invest the spare change from a card payment by rounding up to the nearest whole number.
Robo-advisors are threatening to upend the enormous global wealth management industry in several ways, and they are likely to arrive in full force within the next few years.