Amsterdam – More money, bigger investors, diverse products and specialized funds: This is what market evolution looks like.
How you invest money over the next five years will determine how the world looks in 300 years.Christiana Figueres
At the Global Impact Investing Network's forum here last week, 800 investors and industry leaders gathered to cheer the field's growth and opine on the role of investing in meeting today's challenges and shaping the future.
Amit Bouri, the GIIN's CEO, said, “Investors are increasingly bullish about the use of capital to address social and environmental challenges, and we are confident that this trend will continue.”
The GIIN's new report, Impact Investing Trends: Evidence of a Growing Industry, is based on data from 62 impact investing organizations that participated in the GIIN annual surveys over the past three years. These investors committed $10 million to impact investments since inception or completed at least five impact investments, or both.
The study shows a steady growth of assets under management. Investors were satisfied with both the financial and impact performance of impact investments – 85 to 95 percent of participants reported financial returns at or exceeding expectations.
Impact investors are active around the globe and across sectors and asset classes. In the last five years, the sector has attracted a new and diverse set of players, including Bain Capital, BlackRock, Credit Suisse, Zurich and Axa. As the sector matures, new firms are entering and rolling out institutional-quality investment products.
Growing assets. Assets from the participating organizations grew from $25.4 billion in 2013 to $35.5 billion in 2015, a compound annual growth rate of 18 percent. Capital raised by fund managers grew from $1.7 billion in 2013 to $2.3 billion in 2015.
New investors. Fund managers are building track records and beginning to demonstrate financial and impact results that meet investor expectations. Institutional investors are taking note. Elevar Equity, for example, has attracted an increasing number of institutions to its funds.
Growing specialization. Asset owners like Prudential and Dutch development bank FMO said they are finding more funds focused on specific geographies and impact themes. Forestry, renewable energy and women-owned businesses are attracting more interest, though microfinance and financial services, energy, housing, and food and agriculture still command the most capital. Over 60 percent of assets were invested in emerging markets.
Diverse asset class and stages. While most of the capital (70 percent) was allocated through private debt and private equity, allocations to public equity and real assets saw a significant increase (126 percent and 48 percent, respectively). The largest share of assets was allocated to growth-stage and mature companies. Allocations to venture capital grew by 42 percent.
“There is a sense of urgency felt around the world,” said Marilou van Golstein Brouwers of Triodos Investment Management. She quoted former UN climate chief Christiana Figueres from a recent visit to Triodos's offices: “How you invest money over the next five years will determine how the world looks in 300 years.'”