J.P. Morgan and the Global Impact Investing Network (GIIN) have published the 2015 annual impact investing survey, Eyes on the Horizon, revealing a growing global market with an increasing number of impact investments being made across all geographies and a range of sectors.
The survey present perceptions of the impact investment market as well as portfolio performance from 146 of the world’s largest impact investors, including fund managers, banks, development finance institutions, foundations, and pension funds.
Collectively managing a total US$60 billion in impact investment assets, the surveyed sample committed US$10.6 billion to impact investments in 2014, and plan to commit a further 16% (US$12.2 billion) in 2015.
Survey participants reported that their portfolios are performing mostly in line with both their social/environmental performance and financial return expectations.
- 35% of invested capital 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 sectors to which the largest number of respondents plan to increase their allocations are Energy, Food & Agriculture, and Healthcare
- The most common sectors in which private equity exits took place in the last five years are Microfinance and Other Financial Services
- 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
Respondents indicated progress across the board on several key indicators of market growth, including: collaboration among investors, availability of investment opportunities, usage of impact measurement standards, and number of intermediaries with significant track record. Compared to 2013, respondents seemed to see more progress in 2014 on the availability of investment opportunities at the company level.
However, certain challenges remained consistent in investors’ views. “Lack of appropriate capital across the risk/return spectrum” ranked first among a set of challenges this year, and “shortage of high quality investment opportunities with track record” ranked second.
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.”