Following is a summary of a paper published by the Global Impact Investing Network (GIIN), May 2018, 53 pages, available at:
https://thegiin.org/assets/2018_GIIN_Annual_Impact_Investor_Survey_webfile.pdf
The Global Impact Investing Network (GIIN) recently collected “229 respondents’ perspectives on the growth and development of the impact investing industry” as part of its Annual Impact Investment Survey. GIIN defines impact investing as “investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return.” In analyzing the dataset, the authors find the following trends:
1. The industry is composed of a diverse set of investors. The respondents differ in terms of organization type, region in which they are headquartered, region in which they invest, sector in which they invest, level of targeted return, and preference for debt versus equity.
2. The impact investing market is growing. During 2017, the respondents invested a total of USD 36 billion via 11,000 transactions. On average, they plan to increase their capital investments by 8 percent and their number of new deals by 5 percent during 2018. Of the 82 investors that participated in the last five years of the survey, aggregate assets under management have grown at a compounded annual rate of 13 percent.
3. The investors use a range of methods to measure investment performance. Sixty-nine percent use proprietary metrics to measure quantitative performance, while 66 percent use qualitative data. Fifty-nine percent use the Impact Reporting and Investment Standards (IRIS) framework, a set of quantitative and qualitative performance standards developed by GIIN.
4. Most impact investors describe their investment performance as satisfactory. Eighty-two percent said their investments met expectations for impact, while 76 percent claimed the same for financial performance. The average realized return since inception was 12.5 percent for equity investors and 5.1 percent for debt investors.
5. Impact investors face a range of risks. The most commonly cited concern was their investees’ “business model execution and management risk,” which was identified by 29 percent of respondents. The two next most commonly cited risks – each named by 22 percent of respondents – were “country and currency risks” and “liquidity and exit risks.”
By Nicholas Galimberti, Research Associate
Sources and Additional Resources
GIIN homepage
https://thegiin.org
IRIS website
https://iris.thegiin.org
2018 Annual Impact Investment Survey executive summary
https://thegiin.org/assets/2018_GIIN_AnnualSurvey_ExecutiveSummary_webfile.pdf
2018 Annual Impact Investment Survey
https://thegiin.org/assets/2018_GIIN_Annual_Impact_Investor_Survey_webfile.pdf
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