How do Impact investments perform ?
Some key findings according to the recent
Annual Impact Investor Report 2018
conducted by the Global Impact Investing Network :
1. The market is diverse – impact investors come from a wide range of sectors i.e., fund managers, banks, family offices, insurance and pension funds. They are managed in developed markets in the US,Canada, Europe and emerging markets in Asia Pacific and the African continent – investments made were almost proportional in emerging and developed markets. In terms of target returns, the GIIN found that 64% of their respondents target risk-adjusted, market-rate returns. The remainder sought below-market-rate returns that are either closer to market-rate returns or closer to capital preservation. Two-thirds of respondents make only impact investments; the remaining third also make conventional investments. The large majority of investors in this study invest through private equity and private debt.
2.The impact investing industry is growing – over half of the participants in this project made their first impact investment in the past decade, indicative of the ongoing entry of new players to the industry. In terms of investment amounts, in 2017 there was a reported USD 35.5 billion investment into 11,136 deals and that number is set to rise USD 38.5 Billion into 11, 712 deals for the 2018 fiscal year.
3.Impact investors demonstrate a strong commitment to measuring and managing impact. Social and Environmental impact businesses are the bulk of where the impact investments were made and to gain the most of these investments, impact measurements were put in place as indicators of how well investments are doing in terms of driving social/environmental impact management, to inform investment decisions, to hold investees accountable, and to hold their own teams accountable to impact. Where most set up a mix of tools, systems and proprietary metrics to measure their social and environmental performance, the ratification of the UN Sustainable Development Goals have allowed for most investors to track their investments on the SDGs.
4.Overwhelmingly, impact investors report performance in line with both financial and impact expectations. A large majority of Impact investors in this report claim that their investments have met or surpassed expectations both financially and impact-wise.
5.Impact investors acknowledge remaining challenges that need to be addressed within the industry. Despite the overall good news, the transparent and accountable nature of impact investing has brought about it a new set of challenges both for impact investors and for businesses alike.