Impact investing in Australia is set to grow significantly over the next five years, with strong interest from investors and a large number looking to consider making investments that intentionally deliver positive social and environmental outcomes.
123 investors – accounting for more than $333 billion of Australia’s funds under management – participated in Australia’s inaugural impact investment survey, with the results launched in the Impact Investing Australia 2016 Investor Report, written in collaboration with Melbourne Business School and the University of Melbourne.
Respondents included investors already active in impact investing as well as those not yet active in the field, and comprised institutional investors; trusts and foundations; not-for-profit organisations; and individual investors.
The Impact Investing Australia 2016 Investor Report reveals that active impact investors would like to triple their allocation to impact investments over the coming five years, while the vast majority of investors currently not active in impact investing indicate they are likely to consider the social, environmental and cultural impact as a metric for investment decisions over the next five years.
“This Report makes an important contribution to understanding how the demand for impact investing is shaping in Australia. It provides new insights into investors’ awareness and interest in impact investing, as well as the future prospects and challenges facing this growing field,” said Daniel Madhavan, CEO of Impact Investing Australia.
“We are seeing that impact investors have a preference for real assets, pay for performance instruments and venture capital opportunities. Housing and healthcare assets appear to be significant areas of unmet demand amongst active institutional investors,” said Madhavan.
“There appears to be an unmet need from investors for financial services and advice that incorporate social and environmental impact. More deals at scale, more research and more data are all identified needs, and are all critical for growing the market, helping more investors participate and ultimately, increasing the capital available for tackling our social challenges.”
Mission alignment is the primary motivating factor for allocating funds to impact investments among active investors. Other factors including client demand, financial returns, diversification benefits and corporate social responsibility.
The Investor Survey was coordinated by a Working Group of senior stakeholders from a range of organisations including Standard & Poor’s, JBWere, Responsible Investment Association Australasia, Myer Family Company and Koda Capital.
“The Report demonstrates that respondents are willing to increase their involvement in impact investment, although there are myriad challenges to be overcome,” said Brad Potter, Director of the Asia Pacific Social Impact Centre at the University of Melbourne. These include developing more effective measures and reporting practices for social impact as well as incubating and growing business models that deliver both close to-market-rate financial returns and long term social impact.”