Covid-19 unlikely to curb impact investors’ appetite – report

The covid-19 pandemic is not scaring impact investors away from their work, a report from the Global Impact Investing Network found.

More than half (57 percent) of respondents to GIIN’s covid-focused survey, conducted as a follow-up to its Annual Impact Investor Survey 2020, indicated they are “unlikely” to change the volume of capital they had planned to commit to impact investments in 2020 amid the health crisis.

One in five are at least “somewhat likely” to commit less capital than they had planned, while 15 percent indicated they are likely to commit more capital than planned.

As covid-19 spread, respondents’ perceptions of market stability and performance shifted. Almost half (46 percent) of respondents expect their portfolios to underperform their financial expectations and 35 percent expect performance in line with expectations.

By contrast, 16 percent of investors expect underperformance in terms of impact delivered by their investments, while 18 percent expect outperformance.

“In the near term, every investor will be taking stock of his or her portfolio and pipeline, to try to better understand what the current crisis means for financial plans going forward,” Amit Bouri, GIIN co-founder and chief executive told sister title Private Equity International earlier this year.

“As we move towards the broader recovery phase, however, I think we’ll see greater interest and demand for impact investing opportunities from a broad range of LPs, including institutional investors and family offices. The focus of impact investors is not only to achieve financial objectives, but also to meet a range of social impacts, which are likely to be prioritised by a broader set of investors looking to allocate capital to drive the economic recovery and support community development.”

Two-fifths of respondents to the covid-19 survey believe overall risk severity has “very likely” changed because of the pandemic.

The report noted impact investors are mitigating the potential for defaults by renegotiating loan terms, investing in more funds and “exercising patience” to still realise their performance expectations over the long-term.

The total impact investing market reached $715 billion as of end-2019, a 42.4 percent increase from the previous year. Meanwhile aggregate assets under management of repeat respondents to the survey nearly doubled to $98 billion in 2019, from $52 billion in GIIN’s 2015 year-end data.

In terms of key sectors and geographies, respondents allocated the most capital to energy investments, followed by financial services and microfinance. More than half of the capital is allocated to developed markets, with the US and Canada being the top regions of investment, the study found.

Over the next five years, concerns about greenwashing (66 percent) loom largest, followed by the inability to demonstrate impact results (35 percent) and the inability to compare impact results with peers (34 percent).

GIIN conducted the survey between February and April this year across 294 impact investing organisations that manage $404 billion of impact investing assets. Of the respondents, 65 percent are asset managers; around 20 percent are foundations and development finance institutions; and the remaining 15 percent are family offices, insurers, pensions and other organisations.