While many investors may be wondering how to preserve the environment, and reap great returns at the same time, a latest research report says that there is potential for impact investors to make healthy returns. Impact investors invest into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return. A latest study by the The Global Impact Investing Network (GIIN) finds that across private market strategies, such as private equity, fixed income and real assets, the distribution of impact investing fund returns is similar to results for conventional markets.
“There’s a persistent myth that impact investing automatically necessitates a trade-off in financial performance,” GIIN Research Director Abhilash Mudaliar, told Forbes adding, “But it’s quite feasible for impact investors to make competitive returns.”
The report evaluates studies on the financial performance of funds in private equity, private debt and real assets, as well as individual investor portfolios, conducted by Cambridge Associates, McKinsey & Co and the GIIN, itself, among other organizations. Other research conducted by the GIIN shows that over the past “several years” the growth of capital and assets under management has grown at a rate of 15% to 18% a year.
In its 2017 Annual Impact Investor Survey, GIIN observed that fund managers are seeing significant interest from most investor types, especially foundations, family offices, and banks, and growing interest from sovereign wealth funds, pension funds, and insurance companies.
A McKinsey report says that the global market for impact investments is projected to grow to $300 billion or more by 2020. “Although this is still a fraction of the total private-equity assets under management (about $2.5 trillion in 2016), mainstream investors have entered the arena and are bringing scale to what was earlier considered a niche,” observed the report.
Noting the rise of impact investing in India the report says that between 2010 and 2016, India attracted over 50 active impact investors, who poured in more than $5.2 billion. About $1.1 billion was invested in 2016 alone. “Impact investments generated a median gross IRR of 10 percent in dollar-adjusted terms. More significantly, they touched the lives of 60 million to 80 million people in India—about the size of the population of France. And as these social enterprises scale, so will their impact,” observes the McKinsey report.
