About 125 of the world’s largest impact investors, including fund managers, banks, foundations, development finance institutions, and pension funds surveyed by J.P. Morgan and the Global Impact Investing Network (GIIN) expect to commit 19% more capital to impact investments in 2014 compared to 2013, as satisfaction with the financial returns and the social and environmental impact of these investments remains high.
Spotlight on the Market, the 2014 edition of the JP Morgan and GIIN annual impact investor survey, released, reveals market growth amidst greater government support, new product and fund launches, and widespread impact measurement.
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For the first time, the survey provides detailed insight into asset allocation trends across regions, sectors, and financial instruments from the largest-ever respondent group, up 26% this year from 2013. Among the key findings:
Rise in capital allocations and number of transactions expected in 2014
- Expected commitments of US$12.7 billion expected by survey participants in 2014, up from US$10.6 billion committed in 2013, a 19% increase
- 31% anticipated increase in the number of deals
- US$4.5 billion fundraising target among asset managers in 2014 versus US$2.8 billion raised in 2013
Asset allocations
- Collectively, respondents manage US$46 billion in impact investments, of which 70% is invested in emerging markets and 30% in developed markets
- Development finance institutions manage 42% of total assets, followed by fund managers that manage 34% of total assets
- Microfinance and other Financial Services each account for about a fifth of respondents’ impact investment assets (21%), followed by Energy (11%) and Housing (8%)
- Allocations are primarily in private markets; 44% of assets are currently invested through private debt and 24% through private equity
- More investors plan to increase the percentage of their portfolios invested in Sub-Saharan Africa, Asia and North America, relative to other regions
- More investors plan to increase the percentage of their portfolios allocated to Food & Agriculture, Healthcare, and Financial Services (excluding Microfinance); the highest number of investors plan to decrease the percentage of their portfolios allocated to Microfinance, relative to other sectors
Investor motivation and satisfaction
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By GlobalData- 91% of investors surveyed reported financial returns above or in line with their expectations
- 99% reported social and/or environmental impact above or in line with their expectations
- Over 50% of investors are seeking competitive financial returns
- Responsibility, efficiency and client demand among top motivators for making impact investments; shortage of quality deals and lack of appropriate capital remain top challenges
Impact measurement
- 95% of respondents reported that they use metrics to measure the social and/or environmental impact of their investments.
- Over two-thirds also stated that standardized impact metrics are important to the growth of impact investing.
Yasemin Saltuk, director of Research for JP Morgan Social Finance and co-author of the report said: "From the results, we see the rise of a vibrant impact investing marketplace, where investors are targeting a wide variety of social, environmental and financial objectives and finding themselves satisfied with the results. As collaboration between investors, governments and other key participants continues in 2014, we remain optimistic about the growth and development of the practice."
Amit Bouri, managing director at the GIIN and co-author of the report said: "With more respondents than ever, this survey offers an unprecedented view into the impact investing market, which has tremendous momentum in 2014. The survey demonstrates increased capital commitments and diversity as many investors are making allocations across investment instruments, sectors, and regions. Overall, we see an increasingly sophisticated global impact investing market, supported by growing investment track records and high-level collaboration among governments and major investment institutions."
