Small logo Subscribe to leading news on impact investing. Learn More
The Brief Originals Dealflow Signals The Impact Alpha Impact Voices Podcasts Agents of Impact Open
What's Next Capital on the Frontier Measure Better Investing in Racial Equity Beyond Trade-offs Impact en las Americas New Revivalists
Local and Inclusive Climate Finance Catalytic Capital Frontier Finance Best Practices Geographies
Slack Agent of Impact Calls Events Contribute
The Archive ImpactSpace The Accelerator Selection Tool Network Map
About Us FAQ Calendar Pricing and Payment Policy Privacy Policy Terms of Service Agreement Contact Us
Locavesting Entrepreneurship Gender Smart Return on Inclusion Good Jobs Creative economy Opportunity Zones Investing in place Housing New Schooled Well Being People on the Move Faith and investing Inclusive Fintech
Clean Energy Farmer Finance Soil Wealth Conservation Finance Financing Fish
Innovative Finance
Personal Finance Impact Management
Africa Asia Europe Latin America Middle East Oceania/Australia China Canada India United Kingdom United States
Subscribe
Features
Series
Themes
Community
Data
Subscribe Log In
More

Even impact investors are fleeing risk in the face of the global pandemic



ImpactAlpha, July 9One in five impact investors are retreating – cutting back commitments – in response to the COVID crisis.

Most investors are currently in ‘risk-off’ postures, meaning that they are trying to reduce portfolio risks and are therefore looking at fund opportunities that are either inherently low-risk (cash equivalents, fixed income, etc.) or which have built-in risk mitigants,” according to the latest brief from the Global Impact Investing Network’s Response, Recovery, and Resilience Investment Coalition.

The pullback is hurting fundraising, even for managers that had built in tranches of junior debt or first-loss protections. Commercial investors want even more coverage from such catalytic tranches, according to the R3 coalition’s survey of 40 individuals.

Among other insights:

  • Reimagining risk. Market volatility has made it difficult for investors to settle on valuations and to underwrite risk. One fund manager redesigned its risk framework to reflect dependence on suppliers and local labor, the ability to function during a lockdown, and the likelihood of a quick recovery. An asset owner now requires monthly (rather than quarterly) risk assessments from entrepreneurs that include cash flows, reopening plans, and operational adaptations. Underwriting criteria set before COVID-19 are not proving useful during the pandemic, but some iInvestors are providing bridge loans and flexible debt to companies that can recover quickly after lockdowns (see, “Investors that demonstrate flexibility and patience prove catalytic in COVID crisis).
  • Due diligence. Investors are using COVID-related scenario analysis tools including Capria’s Edge platform and IIX’s COVID-19 resilience tool, and streamlining decision making with Zoom and Whatsapp calls, online applications and smaller loans sizes (see, “Redesigning due diligence for a deal pipeline in lockdown,” by Suzanne Biegel on ImpactAlpha).

You might also like...