In a recent article published by Sustainable Brands, a report published by the Global Impact Invest Network states that 95% of Impact Investors say returns have met or exceeded expectations. Impact investments are investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return. Impact investing is no longer just a feel-good footnote to an investor’s portfolio. It has become a vibrant industry, offering proven financial returns and demonstrable social and environmental progress.
62 financial institutions that are involved with Impact Investing were surveyed and asked about their findings and results. Some of the key points were:
- Survey respondents demonstrated strong growth, collectively increasing their impact investing assets under management (AUM) from USD 25.4 billion in 2013 to USD 35.5 billion in 2015, a compound annual growth rate of 18 percent.
- The survey showed that respondents have maintained a steady flow of activity, committing a total of USD 7.1 billion to 3,332 deals in 2013, USD 9.2 billion to 3,726 deals in 2014, and USD 9.1 billion to 3,096 deals in 2015.
- The volume of capital raised by fund managers increased at a compounding rate of 18 percent each year, growing from USD 1.7 billion in 2013 to USD 2.3 billion in 2015.
- Financial performance was at or above expectations for 85 percent to 95 percent of respondents each year, impact performance was at or above expectations for 98 percent of respondents.
- Over 60 percent of AUM was in emerging markets and approximately 70 percent of AUM was allocated through private debt and private equity each year.
- The sectors accounting for the highest proportions of AUM were microfinance and other financial services, energy housing and food & agriculture.
- The industry continues to progress across various indicators of market growth, but consistent challenges remain. Respondents reported seeing significant progress in terms of the number of intermediaries with successful track records, levels of government support for the market, and the availability of exit options. Notwithstanding this progress, respondents consistently cited ‘lack of appropriate capital across the risk/return spectrum’ and ‘shortage of high-quality investment opportunities with track record’ as top challenges facing the industry.
Impact investments can be made in both emerging and developed markets, and target a range of returns from below market to market rate, depending on investors’ strategic goals. The growing impact investment market provides capital to address the world’s most pressing challenges in sectors such as sustainable agriculture, renewable energy, conservation, micro-finance, and affordable and accessible basic services including housing, healthcare, and education.
The investments that were studied have demonstrated strong growth, collectively increasing their impact investing assets under management by 18%. The top three sectors receiving the highest proportions of funding were micro-finance, other financial services, and energy.
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