Impact Investors Boosting Their Bets This Year

May 23, 2016 at 10:00 AM
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In 2015, investors committed $15.2 billion to impact investments and planned to increase capital committed this year by 16%, the Global Impact Investing Network found in its sixth annual survey.

According to GIIN, impact investors make investments into companies, organizations and funds, aiming to generate measurable social and environmental impact alongside a financial return.

Last year, impact investors in the poll committed capital to 7,551 deals, and said they would commit capital to 11,722 deals in 2016.

GIIN's survey, which was conducted between December and February, included responses from 158 impact investment organizations, including fund managers, foundations, banks, development finance institutions, family offices, pension funds and insurance companies.

Forty-four percent were based in North America, 32% in Europe and 20% in emerging markets. Each respondent had committed $10 million in impact investments since its inception and/or had closed at least five impact investing transactions.

Respondents reported a variety of reasons for allocating capital to impact investments, the top three motivations being a commitment to responsible investment, a desire to meet impact goals and response to client demand.

At least half of investors in the poll said they targeted access to finance, employment generation and health improvement, education and income growth/livelihoods support.

Renewable energy, energy efficiency and clean technology were the top environmental impact themes.

At year-end, investors managed some $77 billion in impact assets.

Fund managers, which comprised 57% of survey respondents, managed 58% of assets, according to GIIN. In 2015, they raised $6.7 billion for impact investing, and they planned to raise $12.4 billion in 2016.

Private debt instruments accounted for 35% of impact assets, real assets 25%, private equity 17%, public equity 9%, equity-like debt 6% and public debt 4%.

According to the survey, 59% of respondents primarily targeted risk-adjusted, market-rate returns, while 25% aimed primarily for below-market-rate returns that were closer to market-rate returns and 16% targeted returns that were closer to capital preservation.

Eighty-nine percent respondents said their investments' financial performance was in line with or, for 19%, above expectations, and 99% reported impact performance in line with or better than expectations, with 27% reporting outperformance.

Respondents said the impact investing sector had become more sophisticated, with progress in professionals with relevant skill sets, research and data on products and performance and sophistication of impact measurement practice.

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