Impact Investors Target Increase in 2014

Impact investors are set to invest 19 per cent more than last year in 2014, prioritising financial return and clearly defined impacts, according to a major global benchmarking survey.

Spotlight on the Market, by financial services firm J.P. Morgan and the Global Impact Investing Network (GIIN), is the the fourth annual survey of its kind, capturing data and market perspectives from 125 impact investors managing more than $US10 million or more of impact investment capital.

Results showed that respondents committed $US10.6 billion in 2013 and intended invest $US12.7 billion in 2014 – a 19 per cent increase.  

Those who had responded to the survey in both 2013 and 2014 reported a 10 per cent increase in capital committed between 2012 and 2013 and a 20 per cent increase in the number of deals.

The intention to achieve impact as a result of investment and financial success were the most important considerations for investors.

“When asked to prioritise different characteristics of impact investments, 80 per cent of respondents indicated that generating financial returns is essential and 71 per cent indicated that determining impact objectives at the time of investment is essential,” the report said.

About half the sample sought financial outcomes at a higher level, where returns were competitive with those of mainstream investments.

On existing investments, 20 per cent of respondents reported an outperformance against their impact expectations and 16 per cent reported an outperformance against their financial return expectations.

Conversely, only one per cent reported an underperformance on impact, while nine per cent reported financial underperformance relative to expectations.

“Survey participants reported that their portfolios are performing mostly in line with both their impact expectations and financial return expectations,” the report said.

“Respondents indicated that the most useful government support would be to implement policies that improve the risk/return profiles of investments, either through credit enhancement or tax credits or subsidies.”  

Respondents indicated progress on several key indicators in the past year, including:

• market growth;

• collaboration amongst investors;

• usage of impact measurement standards;

• availability of investment opportunities;

• number of intermediaries with significant track record.

Yet as they did in 2013, respondents identified a “lack of appropriate capital across the risk/return spectrum” and a “shortage of high quality investment opportunities with a track record” as the most limiting characteristics of the Impact Investing market.

In Europe, Central Asia, the Middle East, North Africa and Oceania, more than one in three reported that no deals they considered passed initial screening.

The only regions where more than 25 per cent of respondents indicated that "many" deals passed initial financial and impact screening were North America and Latin America and the Caribbean.

A 2013 report suggested that impact investment in Australia was in its infancy and limited to a small number of first-movers, but had potential to grow significantly.

Of the assets under management examined in the survey, only two per cent were in Oceania.  

Read the full report here.