More than 80 percent of institutional investors say impact investments met their expectations in 2012
Impact investing will grow in 2013 compared with last year after major institutional investors reported satisfaction with the performance of previous investments, according to a survey by JPMorgan and the Global Impact Investing Network.
Combined investments of the 99 fund managers, foundations, development finance institutions, pension funds and others surveyed totaled $8 bn last year and will rise to $9 bn this year, states the report. The institutions also plan to make an average of 10 specific impact investments this year, up from seven last year.
Impact investing occurs where investments are made to generate both a financial return and a positive social or environmental impact. It takes place across asset classes but is best known for occurring in the venture capital world.
‘We are especially encouraged by the findings in this survey: despite the market’s early stage, investors’ portfolios are meeting financial expectations in addition to social and environmental expectations,’ says Yasemin Saltuk, research director for JPMorgan Social Finance and co-author of the report, in a release. ‘The findings from this report are insightful and we are optimistic for the continued growth in investments that have a positive social and environmental impact.’
Impact investment returns met the expectations of 84 percent of the institutional investors surveyed and exceeded the expectations of a further 14 percent, according to the report. Only 2 percent of respondents say their investments are doing more poorly than expected.
Sixty-five percent of the investors surveyed say they are seeking ‘market rate returns’ in their impact investments, while 23 percent would tolerate returns that are slightly below market rates and 12 percent say they would accept returns close to capital preservation rates.
Among the investors whose investments were exceeding their expectations, 77 percent set out targeting ‘market rate returns’ while the rest set out willing to tolerate returns slightly below the market rate.
Sixty percent of respondents also say they use third-party ratings of social or environmental factors, if they are available, before making an impact investment decision, while 10 percent say they use such ratings for all of their impact investment deliberations. The ratings are not considered at all by 30 percent of the investors surveyed.
The report also determines that 73 percent of the impact investors surveyed offer impact investment products to their own clients. Overall, 50 percent say they offer these products to both institutional and individual investors while 20 percent offer them only to institutions and 3 percent provide them only for individuals.
