Report finds one third of investors plan to boost impact investment allocations
According to new research, impact investing has become such an appealing prospect that one third of institutional investors have plans to boost their portfolio allocations to the asset class over the next three years.
The survey was carried out by Greenwich Associates and American Century Investments and questioned 75 institutional investors based in the USA between November 2015 and March 2016, along with over 50 professional buyers at intermediary distribution platforms and over 150 financial advisors to high-net worth individuals. The findings – which were compiled from answers testing the "knowledge of and receptivity to various approaches to impact investing across the asset management industry" – were published across two reports, entitled ‘Impact Investing: Individual Investors Seeking New Opportunities and ‘Impact Investing: Institutions Awaken to New Possibilities.’
While a third of those surveyed for the research reported that they planned to boost their allocations by some margin over the time period, one quarter reported that they would be increasing their allocations by over 10 per cent.
Greenwich Associates consultant and one of the authors of the research, Andrew McCollum, said: “There is a clear—and growing—desire among institutional investors to use their investment pools to support both the financial and societal goals of participants, organizations and stakeholders.”
The belief in the investment form is overwhelming – the vast majority – 75 per cent – of decision-makers for intermediary platforms along with 80 per cent of financial advisers feel that client allocations to impact investing will indeed see a marked rise over the coming three years.
Despite this positivity regarding growth, however, the research also revealed that there remains a divergence in terms of investor attitude towards the possible returns generated by impact investing.
The vast majority of those questioned for the study reported that they believe impact investments will deliver market returns or more. However, 44 per cent of financial advisers and 40 per cent of corporate pension funds feel that the investment medium is so worth investing in that they would be willing to take lower returns in exchange for the positive social impact the move would generate. Public pension funds, in contrast, feel that profitable investment performance is one of the top requirements for any investment.
Mr McCollum went on to say: “The definition and best practices of impact investing will take shape and solidify as the category attracts new participants and assets. During this maturation phase, investors will benefit by working with intermediaries and asset managers willing to help educate them about impact investing and define the proper role for the category within their portfolios.”