Impact Investors Optimistic Amid Pandemic: Survey

The maturing global impact investing market has grown to $715 billion in assets under management, with investors generally optimistic even amid the coronavirus pandemic, according to the Global Impact Investing Network's 10th annual investor survey.

This year's survey comprised 294 leading investors, who collectively manage $404 billion in impact investing assets.

GIIN noted that although the assets of the respondent sample do not represent the full market size, this year's report also includes an update to the market sizing figure it provided a year ago.

"Last year, the GIIN took on an unprecedented effort to estimate the total size of the impact investing market," GIIN's director of research Dean Hand said in a statement. "This year's updated estimate of $715 billion improves upon the rigorous methodology of its previous figure with a strengthened database that includes over 1,700 impact investors."

The survey found that the industry's robust performance over time — in both impact and financial terms — was motivating investment activity and driving market growth.

Eighty-eight percent of respondents reported that they had met or exceeded their financial expectations, and virtually all said they had met or exceeded their expectations for impact since inception.

GIIN found that the industry has made considerable progress over the past decade in the area of impact measurement and management practices. Sophisticated impact measurements practices enable investors to show real results.

They also ensure accountability against impact washing, which may occur when a fund or company makes impact-focused claims in bad faith, not having truly demonstrated positive social or environmental impact.

At the same time, the study noted that as the market matures, opportunities remain for greater depth and refinement, especially for impact performance comparison and verification of results.

The survey queried investors about their allocations to key sectors and geographies. Sixteen percent of respondents said they allocated energy, followed by 12% who cited financial services (excluding microfinance).

Fifty-five percent of capital allocations went to developed markets, with 30% of that deployed in the U.S. and Canada. The top asset classes were private debt, comprising 21% of the sample assets under management, public equity accounts with 19%.

The survey found a 17% compound annual growth rate among repeat respondents to its surveys. Among those who responded to the 2016 study (based on 2015 year-end data) and this year's survey, aggregate assets under management grew from $52 billion to $98 billion.

Pandemic Effects

The February-to-April data collection period for the new survey coincided with the emergency of the COVID-19 pandemic. At the end of data collection on April 5, GIIN asked investors how the coronavirus might affect their future allocations and risk assessments, to which 122 offered their perspectives.

Among the subset of investors who commented on the implications of the coronavirus outbreak, 57% said they were unlikely to change the volume of capital they had planned to commit to impact investments this year, and 15% said they were likely to commit more.

Twenty percent vacillated about their commitments, saying they were somewhat likely to commit less capital than they had planned.

Nearly half of respondents said they expected impact performance in line with their expectations this year, and 18% expected their portfolios to outperform on impact.

Among less-optimistic investors, 16% said they expect underperformance on impact, and 46% expected underperformance against financial expectations.

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