The market for so-called “impact investing” remains small, but it’s growing, according to a new report from J.P. Morgan and the Global Impact Investing Network.
The organizations released a new report on the impact investment market — investing in projects that aim to make a positive social impact along with a financial return — which finds that impact investors remain modestly optimistic about the sector’s development. A survey of investors found that they believe the niche is “in its infancy and growing”.
The investors surveyed indicate that they are planning to invest almost US$4 billion over the next year, and expect that impact investments will come to comprise 5%-10% of portfolios over the next 10 years — ranging from 5% for institutions to 10% for high net worth investors.
The survey also reports that third-party impact measurement standards are experiencing higher utilization, and there is greater access to information about current investment opportunities and historical performance. It found that investor use of third party systems for impact measurement has increased by 10% since last year, it found, and 65% of survey respondents are aligned with the GIIN’s Impact Reporting and Investment Standards.
In addition to these developments from the private sector, governments are playing an increasing role in the impact investment market by launching investment funds and seeding intermediaries to catalyze private investment, it notes.
The survey also found that investors believe that the top challenge to industry growth is the lack of a track record of successful investments, and that the biggest risks are illiquidity and uncertainty around financial returns. Increased government activity and infrastructure development are helping to address these challenges, improving market information and promoting growth, it says.
“This research underscores the long-term potential of impact investments while recognizing that the market is in an early stage of development,” said Amit Bouri, director of strategy and development at the GIIN, a nonprofit organization dedicated to increasing the scale and effectiveness of impact investing. “The GIIN looks forward to continuing our work with industry practitioners to support market growth. We hope the analysis helps investors to effectively participate in the market, while advancing field-building activities.”