Impact investing reaching the crest of the wave, experts suggest
Impact investing is thriving, but there is more positivity to come over the coming months, industry experts have said.
According to the Global Impact Investing Network (GIIN), investors injected more than $15 billion to impact investments over the course of last year, and they have said they plan to commit even more this year.
GIIN recently carried out a survey of 158 impact investors, managing a total of $77 billion between them, and found that the vast majority – 79 per cent – had plans to either keep the same or increase their impact investment levels this year. Overall, almost $18 billion was being set aside for the impact investment arena in 2016, the respondents said.
Almost 75 per cent of survey respondents said that their impact investments performed at the level they had expected over 2015, with 19 per cent saying that their investments outperformed what they had been hoping for. Just 11 per cent of respondents reported that they felt their impact investments had underperformed in 2015. Most investors said that they had expected the returns to be on a par with the market rate, following a slight adjustment for risk. Meanwhile, 25 per cent reported that they had expected returns on their investments to be just under market rate, while 16 per cent said that they expected returns in line with capital preservation.
The vast majority of the impact investments made in 2015 came from asset managers, who ploughed $7.2 billion into the arena. They reported that they had made these investments on behalf of foundations and family offices in the most part. The expertise and experience offered by these managers meant that many family offices turned to them to make their investments, taking advantage of the risk benefits of investing in a fund and not directly.
Private investments were found to be the most popular instruments for impact investing, according to the survey, with the vast majority – 70 per cent – ploughing their cash into private equity and 56 per cent investing into private debt. Real assets were also found to be favoured by bigger impact investors, such as insurance firms and pension funds and insurers. In terms of the most popular locations for impact investing, Latin America, Sub-Saharan Africa and Western Europe proved to be hits, but still did not compete with North America, which accounted for more than a third of total impact investments made.
Almost all of the investors questioned for the report – 95 per cent – said that they had social impact goals in their mind when making such investments, while 52 per cent reported being more focused on environmental impacts. Among the main impact investments that were made were access to finance, health improvement, education, employment generation and income growth. Renewable energy and energy efficiency topped the environmental investments table. Ninety-nine per cent of the respondents polled reported that they had achieved above or on a par with their expectations when it came to the social and environmental impacts of their impact investments.
Amit Bouri, GIIN CEO, said: "We are encouraged to see the development of a truly diverse and global impact investing market. This survey highlights a thriving market being built across geographies, sectors, and asset classes.”
Amber Nystrom, founder and CEO of Trinity Nexus. and impact investing forerunner, confirmed that the impact investment arena was entering an exciting period, saying: "That wave has that perfect moment, where it’s mature enough, which is where we are in this market, but it hasn’t yet crested, so you still have an opportunity to assume that sweet spot."