Impact investing

The investment case for doing good

Investors generally choose funds based on their desire for either growth or income. In recent years however, another significant driver has emerged as a growing number of individuals and institutions seek to align their investments with their values and principles. There has been an increasing realisation that, along with philanthropy and government aid, private enterprise can contribute to solving social and environmental problems. At the same time, a growing number of investors are expressing a desire to “do good while doing well”. These ‘impact investments’ are made into companies, organisations, and funds with the intention to generate measurable social and environmental impact alongside a financial return. They can be made in both emerging and developed markets, and target a range of returns from below market to market rate. Impact investing is a relatively new term, used to describe investments made across many asset classes, sectors, and regions. As a result, the market size has not yet been fully quantified. A survey conducted earlier this year by the Global Impact Investing Network however, suggests impact investors committed $15.2bn to 7,551 deals in 2015, with a median amount of $12m of capital committed to a median of nine impact investment deals. These respondents planned to increase their capital committed in 2016 by 16% to $17.7bn and plan to increase their deal volume by 55% to 11,722 deals. The rapid growth of impact investing has been accompanied by questions about how to assess impact and concerns about potentially unrealistic expectations of simultaneously achieving social impact and market-rate returns. We brought together an asset owner, consultant and asset manager to discuss the nascent market and share their views on selecting and measuring the success of investments.

Roundtable

The investment case for doing good

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