Impact investing bears fruit as measures of performance improve, finds GIIN
Intentions are translating into real results for impact investors, with 99 per cent of the almost 300 investors who responded to the most comprehensive survey of the market to date saying that they have met or exceeded their impact performance goals, and 88 per cent meeting or exceeding their financial expectations.
The Global Impact Investing Network’s (GIIN) 10th Annual Impact Investor Survey covered 294 impact investors, who collectively manage USD404 billion of impact investing assets – over half of the entire impact investing market.
Over the past four years, the aggregate AUM of the impact investors that have been repeat respondents to GIIN’s annual survey has almost doubled from USD52 billion to USD98 billion – with a compound annual growth rate (CAGR) among those investors of 17 per cent.
Amit Bouri, co-founder and CEO of the GIIN, attributes this to an increase in sophistication: “Over the past decade, we have seen incredible growth and increased sophistication in impact investing. Despite challenges or perhaps because of them, many investors have, and will continue to turn to impact investing to contribute to social and environmental solutions.”
The survey found that strong performance is motivating investment activity, both in financial and impact terms. Over the past decade, the way firms measure impact has become more sophisticated, with strategic use of tools to demonstrate real results and ensure accountability against ‘impact washing’.
Nevertheless, short-term volatility is expected because of the recent pandemic-related volatility, with 46 per cent of impact investors saying they expect portfolios to underperform financially, although almost half still expect impact performance to stay in line with expectations.
The survey found that impact investors are allocating most capital to the energy sector, at 16 per cent of sample AUM, followed by financial services (excluding microfinance), with 12 per cent.
Private debt is the largest asset class to which respondents allocated capital, comprising 21 per cent of the sample AUM – while public equity accounts for 19 per cent. The majority of capital (55 per cent) is being allocated to developed markets with the top region of investment being US and Canada, accounting for 30 percent.
“Investment capital has an important role to play in driving positive impact for our communities and planet, and I believe we’ll see even greater possibilities for what impact investing can achieve, in this moment, as well as in the years ahead,” adds Bouri.