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The pocket guide to impact investing financial performance



Like you, we get a pile of white papers on impact investing. Unlike you (understandably), we try to read them!

So we’re grateful to the Global Impact Investing Network for a handy cheat sheet of the last couple years of research on impact investing financial performance. To better inform investment decisions and attract new participants to the sector, says the industry association, impact investors “can do more to embrace their field-building responsibilities” by being more transparent with their performance data.

First, a few entries:

  • A Wharton Social Impact Initiative study, evaluated the performance of 32 private equity impact investing funds with $1.7 billion in assets and found gross internal rates of return of 9.2%.
  • A McKinsey report on 48 exits from private equity impact funds in India found investments achieved a weighted average return of 11%.
  • Symbiotics looked at 44 microfinance vehicles; the debt funds experienced a pooled average yield of 6.9%.
  • An Impact Investing Australia report looked at financial performance data on 54 private debt investments in Australia and found a weighted average of gross returns of 7.9% per year since inception.
  • A Cambridge/GIIN study on real assets found that timber impact investing funds produced a pooled net IRR of 5.9% compared to 3.3% within a comparative conventional timber funds.

https://medium.com/media/5bdf11840e22af7df6d1fc8c8c8765f1/href

The takeaways, from GIIN research director Abhilash Mudaliar:

Market-rate returns are achievable in impact investing, with returns distributions among market-rate-seeking impact investments comparable to those of analogous conventional investments.

Small funds do not necessarily underperform relative to their larger peers.

The impact investment market includes opportunities for investors with varied risk appetites, investment strategies, and target returns.

The GIIN’s pocket guide also features deep dives into the portfolio performance of funds who have made their data public, including:

This sort of transparency around performance, writes Mudaliar, “allows new players to enter the market confidently, and enables current players to make more informed portfolio allocation decisions, set well-informed performance expectations, and better achieve their investment strategies.”

Impact investors can do more to build the field, says Mudaliar, “by openly sharing data on the financial and impact performance of their investments, either directly to the public or by contributing to aggregated, third-party research.”

Want to share your performance data? Get in touch at thebrief@impactalpha.com.

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