Reflections on Industry Growth, Past and Projected
May 11, 2015 — NEW YORK–(BUSINESS WIRE)– One hundred and forty six of the world’s largest impact investors, including fund managers, banks, development finance institutions, foundations, and pension funds report having committed $10.6 billion to impact investments in 2014, with plans to commit 16% more in 2015.
The surveyed sample, which manages $60 billion in impact investment assets, indicates satisfaction with both financial returns and social/environmental impact performance, compared to expectations.
Eyes on the Horizon, the 2015 edition of the GIIN and J.P. Morgan annual impact investor survey, publishedthis month, reveals a growing global market, with impact investments being made across all geographies and a range of sectors. In its fifth year, the survey continues to provide detailed insight into a number of key market variables such as the types of investors, the number and size of investments made and targeted, as well as reported risk and use of loss protection.
For the first time, the report looks at private equity exits, providing detailed insight on 77 exits. Additionally, this year’s report includes respondents’ perspectives on how the industry has changed over the past five years, as well as what changes they would like to see in the next five years. Among the key findings:
- Collectively, respondents manage $60 billion in impact investments, of which 35% is proprietary capital and 65% managed on behalf of clients
- Investments directly into companies represent a much larger proportion of assets under management (74%) than do indirect investments (20%)
- Housing accounts for 27% of respondents’ assets under management, as do Microfinance and Other Financial Services combined. Following that, 10% is allocated to Energy, while Healthcare and Food & Agriculture account for 5% each
- Allocations continue to be primarily in private markets, with 40% of assets invested through Private Debt and 33% through Private Equity (44% and 24% respectively in last year’s survey)
- The regions to which the largest number of investors plan to increase their allocations are sub-Saharan Africa, followed by East and Southeast Asia, and Latin America & the Caribbean
- The sectors to which the largest number of respondents plan to increase their allocations are Energy, Food & Agriculture, and Healthcare
Performance and exits
- Survey participants reported that their portfolios are performing mostly in line with both their impact expectations and financial return expectations
- 98% of respondents reported social and/or environmental impact outperforming or in line with their expectations
- 89% of respondents reported no significant risk events in 2014
- The most common sectors in which private equity exits took place in the last five years are Microfinance and Other Financial Services (combined 26 of 77 exits), although there were also exits in a variety of other sectors such as Food & Agriculture, Healthcare, and Information & Communication Technologies
- 99% of respondents measure the social/environmental performance of their investments, with the majority aligning with IRIS, the online catalog of generally accepted performance metrics that leading impact investors use to measure social, environmental, and financial performance
- The business value of impact performance measurement for improving financial performance of portfolio companies and informing future investments is ‘very important’ to 65% of respondents
Respondent perspectives on the last five years
- The majority agree that impact measurement practice has improved (77%)
- Governments are playing a more active role (67%)
- The quality of entrepreneurs/investment opportunities has improved (64%)
Yasemin Saltuk, Director of Research for J.P. Morgan Social Finance and co-author of the report said: “Having surveyed the market for the past five years, we certainly are inspired by the growth in investments as well as the sample of exits we captured. Over time, the universe of investors and their approaches to the market have continued to expand, most recently with increased engagement from the corporate sector. In the face of increasing competition, we hope this research serves the market in developing a pipeline of high quality deals going forward.”
Amit Bouri, CEO at the GIIN and co-author of the report said: “The most comprehensive study of impact investing activities and investor experiences, this research continues to underscore an increasingly more sophisticated and growing market that includes a diversity of investors and investment opportunities. We are encouraged to see continued investor confidence in the market and that investments are delivering results.”
Eyes on the Horizon is the fifth in a series of reports, started in 2010, that present perceptions of the impact investment market as well as portfolio performance from a sample of impact investors. Impact investments are investments that are made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return. They can be made in both emerging and developed markets, and target a range of returns from below market to market rate, depending upon the circumstances.
About J.P. Morgan Social Finance
J.P. Morgan Social Finance is dedicated to serving and growing the nascent market for impact investments – those intended to deliver positive impact alongside financial return. To this effect, the Social Finance Group was created in 2007 as a business unit to invest capital in the market and provide client advisory services and analytical market research. For more information and access to the full Social Finance Research Library, please visit: www.jpmorganchase.com/corporate/socialfinance/social-finance
About the Global Impact Investing Network
The Global Impact Investing Network (GIIN) is a nonprofit organization dedicated to increasing the scale and effectiveness of impact investing. Impact investments are investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return. Impact investments can be made in both emerging and developed markets, and target a range of returns from below market to market rate, depending upon the circumstances. The GIIN builds critical infrastructure and supports activities, education, and research that help accelerate the development of a coherent impact investing industry. For more information, please visit www.thegiin.org