For the past decade, the Global Impact Investing Network (GIIN) has published an annual survey of impact investor sentiment and activities, providing valuable insights into the sector’s growth and development. The 2020 Annual Impact Investor Survey shows signs of progress and maturation, with data collected from 294 impact investing organizations.
Read on for a by-the-numbers look at the GIIN survey’s noteworthy results.
USD $715 billion
Aggregate assets under management (AUM) held by impact investors
This number is up from $502 billion in 2019, according to a separate GIIN study of over 1,700 impact investors.
For repeat respondents to both the 2020 and the 2016 surveys, aggregate impact AUM nearly doubled from $52 billion to $98 billion, at a compound annual growth rate (CAGR) of 17%. The fastest-growing regions: Western, Northern, and Southern Europe (expanding at 25% CAGR) and East and Southeast Asia (23% CAGR). Over half of respondents (52%) intend to increase impact investments in Southeast Asia over the next five years.
Respondents who consider the impact investing market to be “growing steadily”
This number suggests investors’ bullish expectations for impact investing’s growth. A further 21% describe the market as “about to take off.” When asked a similar question on the 2011 survey, 75% of respondents indicated that the market was in its very early stages.
CAGR for capital allocations to water, sanitation, and hygiene investments (2015–2019)
This sector represents the fastest growth in capital allocations among repeat respondents. Second in the running is financial services (excluding microfinance), which saw a CAGR of 30% from 2015 to 2019 among repeat respondents. Half of respondents plan to increase the volume of capital allocated to those areas over the next five years.
Healthcare was the third fastest-growing sector, and 51% of respondents plan to increase their capital allocations to healthcare over the next five years.
Respondents who believe they have increased the rigor of their IMM practices
Over the past decade, investors have improved their impact measurement and management (IMM) practices, which are essential to the development of the impact sector. Furthermore, 10 years ago, 85% of respondents used proprietary IMM systems. Today, 89% use third-party tools and frameworks.
At the same time, respondents feel there is room for more improvement, especially when comparing and verifying impact results, according to the GIIN survey.
Respondents who worry about impact washing
Impact investors expect to face various challenges over the next five years, with impact washing the most pressing.
Still, investors seem hopeful. “[T]he market has developed significantly in the last ten years, in terms of a common understanding . . . as to what impact investing really means, the availability of market data, and trends, and the sophistication of impact measurement and management mechanisms,” the GIIN survey quotes one asset manager as saying. “Impact measurement and management may help investors to identify quality investments that will truly have a positive social/environmental impact, separating the wheat from the chaff.”
Respondents who find the financial attractiveness of impact investing vs. other strategies at least somewhat important
In addition, two-thirds of respondents (67%) seek risk-adjusted, market-rate returns for their assets, and 88% report meeting or exceeding their financial expectations. This suggests a shift from the once-common perception of an inherent trade-off between impact and financial performance to a recognition that impact investments can potentially provide competitive returns.
Respondents who are unlikely to change their capital commitments because of COVID-19
In light of the COVID-19 crisis, a majority of impact investors plan to stay the course. That said, 15% are likely to commit additional capital.
In this new normal, a sizable portion of investors also expect to see differing results in terms of financial vs. impact performance. Almost half of respondents (46%) predict their portfolios will underperform relative to their financial expectations, while only 16% expect to underperform in terms of impact.
Respondents’ narrative comments offer further insights. They show that impact investors are responding to the crisis by renegotiating loan terms and exhibiting a willingness to be patient and take a long-term view. Some are aware of their important role in supporting marginalized communities that are bearing the brunt of the pandemic.