Appetite for Impact Investment set at $18B
8 March 2016 at 11:50 am
Over the next five years investor demand for impact investment is expected to reach $18 billion, according to a landmark report.
The Impact Investing Australia 2016 Investor Report revealed that active impact investors would like to triple their allocation in the coming five years, and the vast majority of investors currently not active in the space are likely to consider social, environmental and cultural factors in their investment decisions.
Overall, more than two-thirds of investors expect impact investing to become a more significant part of the investment landscape in the coming years.
The report, produced in collaboration with the University of Melbourne, is the first of its kind, bringing together the results of Australia’s inaugural survey of investors on impact investing.
More than 120 Australian investors, accounting for more than $333 billion in funds under management, participated in the survey.
CEO of Impact Investing Australia, Daniel Madhavan, said the results were “very positive” and provided an insight into how the demand for impact investing was shaping in 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,” Madhavan said.
“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.”
Director of the Asia Pacific Social Impact Centre at the University of Melbourne, Brad Potter, also said advancements in metrics need to be made to ensure impact investing is attractive to investors.
“The report demonstrates that respondents are willing to increase their involvement in impact investment, although there are myriad challenges to be overcome,” Potter said.
“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.”
The report found that mission alignment was the primary motivating factor for allocating funds to impact investments among active investors. Other factors included client demand, financial returns, diversification benefits and corporate social responsibility.
It also said that active impact investors have their portfolios oriented towards children and issues affecting young people, clean energy, and housing and homelessness.
The survey was coordinated by a working group of senior stakeholders from a range of organisations including, JBWere, Responsible Investment Association Australasia, Myer Family Company and Koda Capital.
Respondents comprised institutional investors, trusts and foundations, Not for Profit organisations, and individual investors.