Impact Investing Takes Flight With Big Investors

Despite the April field assistance bulletin issued by the Labor Department stating “fiduciaries may not sacrifice investment returns or assume greater investment risks as a means of promoting collateral social policy goals,” impact investment is soaring, according to the Global Impact Investing Network (GIIN) in its Annual Impact Investor Survey.

The report surveyed  229 impact investors, including fund managers, foundations, family offices and pension/insurance companies located in the United States, Canada and Europe, with the majority investing only in impact assets, and largely using private equity and private debt, with collectively $228 billion in impact investing assets.

Some key findings included:

• Impact investing is growing. Those survey stated they had invested $35 billion in 11,000 deals in 2017 alone, and indicated plans to increase capital invested by 8% in 2018
• The diversity of impact investing has grown. Investors surveyed said they invested across all sectors, such as financial services, energy and microfinance, but the last five years growth has been particularly strong in education, food & agriculture, and in geological areas such as East & Southeast Asia and Oceania.
• A majority of respondents said their investments have met or exceeded their expectations in impact (97%) and financial (91%) performance.
• Almost all impact investors demonstrated a strong commitment to measuring and managing impact of their investments. The majority of firms set targets and tracked progress toward their social/environmental goals.
• Challenges still needing to be addressed are the “lack of appropriate capital across the risk/return spectrum” and the “lack of common understanding of the definitions and segments of the market.”

The same day of these findings, the National Association of Manufacturers released its study, Political, Social and Environmental Shareholder Resolutions: Do they Create or Destroy Shareholder Value/?, which studied the impact of social and environmental shareholder proposals on company returns. It looked at several aspects, including increased disclosures, for example, in climate change resolutions, and in their analysis found that “the evidence demonstrates that the adoption of such shareholder resolutions has no statistically significant impact on company returns one way or the other.” That said, they also noted that such proposals are not harmless, as they often cost millions of dollars and may divert resources away from focusing on shareholder returns.

— Check out Could Impact Investing Replace Charitable Giving? on ThinkAdvisor.