A majority of impact investors, who seek to create positive social or environmental impact beyond financial return, are optimistic about the impact investing industry, according to a new study.
While investors believe the industry is “in its infancy and growing,” they have a positive outlook, and plan to invest almost $4 billion over the next year. Moreover, they expect that impact investments will compose 5% to 10% of portfolios over the next 10 years.
J.P. Morgan and the Global Impact Investing Network earlier this month released Insight into the Impact Investment Market, which highlights 52 impact investors’ perspectives on the state of the industry, as well as data analysis on more than 2,200 of their portfolio investments.
The analysis relied on data collected by the GIIN, a nonprofit organization. Supporting the findings of a 2010 report that included similar data gathered by the GIIN, impact investors’ expectations for financial returns range from concessionary to market-beating, indicating there is room in the market for a wide range of performance.
The report also identifies opportunities and challenges in the impact investing industry:
- Investors’ use of third-party systems for impact measurement has increased by 10% since 2010, and 65% of survey respondents are aligned with the GIIN’s Impact Reporting and Investment Standards.
- Respondents believe that the top challenge to industry growth is lack of a track record of successful investments.
- The biggest risks are illiquidity and uncertainty around financial returns.
Increased government activity and infrastructure development are helping to address these challenges, improving market information and promoting growth, according to the report.