Investors including foundations, family offices, and pension funds had at least $35.5 billion committed to impact investments in 2015, according to a report by the Global Impact Investing Network (GIIN).
The sector’s growth has been “strong” and “steady,” GIIN said, with assets climbing 18% annually since 2013, when impact investments totaled $25.4 billion.
“The report illustrates that impact investing is a powerful movement driven by investors of all types who are effectively putting their capital towards solutions to issues in areas like conservation, education, and affordable housing,” said Amit Bouri, GIIN co-founder and CEO.
Private debt has remained by far the favored instrument for impact investing, representing $15.9 billion of total assets. However, last year also saw a “notable” increase in allocations via public equities and real assets.
Investors surveyed by GIIN largely said they expected impact investments to achieve risk-adjusted returns equivalent to the market rate, though some (21%) were satisfied with returns in line with capital preservation.
Overall, investors were pleased with the investment performance of their commitments, with 15% citing outperformance and 70% reporting returns in line with expectations.
Challenges still remain in the sector, most prominently a lack of appropriate capital across the risk/return spectrum, shortage of high-quality investment opportunities with track records, and difficulty exiting investments, according to survey respondents.
However, some investors said they saw “significant progress” last year in these and other areas, including the availability of research and data and the level of government support for the market.
“The positive trends support that investors are increasingly bullish about the use of capital to address social and environmental challenges,” Bouri said. “We are confident this trend will continue.”
Source: GIIN’s “Impact Investing Trends: Evidence of a Growing Industry”