A new survey of so-called “impact investing”, investments that aim to produce both a financial and either social or environmental return, finds that financial commitments to these sorts of endeavours are continuing to grow.
The survey, which was carried out by JPMorgan and the Global Impact Investing Network (GIIN), finds that investors report that they committed US$8 billion to impact investments in 2012, and that they expect that to grow to US$9 billion in 2013. The survey notes that, while respondents plan to slightly increase the number of transactions they make, from seven deals in 2012 to 10 in 2013 (at the median), the median amount they are each planning to allocate in 2013 is the same as for 2012.
The sector focus of the investors responding to the survey indicates an increasing focus on sectors outside of microfinance and other financial services, the survey notes; with food & agriculture ranking first, and healthcare initiatives in second place. Allocations to these sectors have grown dramatically in recent years, and this could continue to rise, it suggests.
Most respondents primarily seek market rate financial returns, the survey says, with 65% targeting returns that are at market rates, and 35% targeting below market returns. And, it says that, whatever their expectations, 84% reported that their portfolio’s impact performance is in line with their expectations, 14% report outperformance, with only 2% underperforming. On the financial side, 68% reported in-line performance, with 21% outperforming and 11% underperforming expectations.
The survey also found that respondents identified “business model execution and management” as the top risk to their portfolios, and believe the market continues to “be challenged by a lack of appropriate capital across the risk/return spectrum”, as well as a shortage of high quality investment opportunities.
“However, they indicated progress being made evenly across these and other indicators of market growth,” it notes, adding, “We find these conclusions promising for this young and growing market, and hope that the data we have presented will help investors to further develop their impact investment portfolios.”