Impact Investment Market: Trends
Some global trends in impact investment are educational programmes, wholesale institutions, capacity building, AUM allocation to infrastructure, etc. The trend of increased level of interest for Catholic-based organisations in impact investing is covered by UK media.
Global Trends in Impact Investment
- These programmes have been implemented in almost all countries, with the remaining countries in the process of developing them.
- As impact investment has become a larger market, educational programmes have helped to broaden the ecosystem and deepen the knowledge of the sector.
- Additional human capital into the impact economy is crucial to continue its expansion.
- The majority of countries analysed have some educational programmes in place, such as university courses, research centre courses, and investor training.
- This shows a clear intention to build an understanding around the industry.
- These have been favoured among developed countries, while developing countries are still in the early stages of considering whether to establish such an institution.
- South Korea is an example of how quickly countries are now able to set up wholesale institutions, with the official inauguration of the NAB in February 2018 and the wholesaler expected to be established in September 2018.
- The aim has been to directly support the development of intermediaries and to champion market building within impact investment.
- The National Advisory Board (NAB), alongside different government departments, have been discussing the establishment of a wholesale fund.
- The local NAB for each country covered is currently in conversations with the government to undertake an analysis of the feasibility of a wholesaler.
- One method for establishment could be to partially use unclaimed assets alongside additional money from other sources (e.g. banks).
- Capacity building seems universally acknowledged as one of the foundational tools that government facilitates.
- Countries have recognised its importance to help create a pipeline of opportunities for investment.
- This is demonstrated through the large number of countries, 16 in total, who either already have targeted programmes or are in the process of establishing them.
- This is to promote impact businesses by providing them tools to support and grow their businesses.
- The majority of the countries have capacity building programmes, largely in the form of incubators and accelerators.
Access to Capital
- Countries universally recognise that access to capital is a foundational policy tool for the impact investing ecosystem.
- All countries have funding programmes to support impact businesses either specifically (impact funds) or indirectly (e.g. funds for SMEs).
- At the national level, each government has been working to catalyse investment in affordable housing.
- This is facilitated by capital for seed, early stage, and growth capital for all enterprises (including impact businesses) through grants and subsidies.
- Using a portion of this capital specifically for impact investing would help to further support impact businesses.
AUM Allocation to Infrastructure
- Over the past four years, AUM allocation within impact investment grew towards infrastructure at the fastest rate, at 61% per annum.
- Other fast-growing sectors included WASH and ICT, at 43% per annum each.
- Substantial energy investments are again reflected, with allocations to the sector growing at 30% per annum.
- Interestingly, whereas non-microfinance financial services grew at 27% per annum, microfinance grew at just 6% annually.
AUM by Equity
- Impact investors deploy capital through a range of asset classes, often leveraging multiple financial instruments through diversified investment strategies.
- 67% of investors allocate via private equity as the most common trend.
- 55% allocate via private debt, which account for 22% and 26% of total AUM excluding outliers.
- Including outliers, however, private debt allocations account for 39% of respondents’ assets.
- Much capital also flows to public markets, with 17% in public equities and 14% in public debt.
- Within the impact investment space there has been more attention on gender lens.
- There is a new awareness within the impact investment community that investing in women and minority-led businesses is critical to creating a more equitable world.
- Impact investing drives more capital to female founders than traditional VC capital.
- Women make up larger percentages of impact investing asset management teams than traditional asset management.
Trend Covered by the UK Media
Increased Level of Interest for Catholic-based Organisations in Impact Investing:
- Catholics are starting to put their philanthropic billions into profitable investments instead — a new aid model, backed by Pope Francis, that experts say could help end poverty.
- Catholic investment funds, which manage capital from hundreds of faith-based organisations, are increasingly investing in projects in emerging economies and earning a return while also doing good, experts say.
- "There’s definitely an increased level of interest for Catholic based organisations in impact investing", said the head of the Swiss foundation, which is directed by Catholic teachings about social justice and giving dignity to the poor.
- At the first of three conferences hosted by the Vatican on impact investing in 2014, he said it was important that ethics play its part in finance, and that markets should serve the interests of people and the common good of humanity.
- Matthew Zieger, the first national director of impact investing with Catholic Charities USA, said impact investing to fund affordable housing and job creation was growing at his network, which represents more than 160 Catholic agencies worth about $50 million.
- Another organisation spearheading the new mission is Catholic Relief Services (CRS), the church’s U.S.-based humanitarian agency and joint host of the Vatican conferences, to explore how the faithful can harness capital to help the poor.
- Other big Catholic institutions, such as Ascension Health, the largest non-profit health system in the United States, and Georgetown University, are also impact investing, according to Amit Bouri, chief executive of GIIN.
- Charismatic Argentine Pope Francis, who has championed the poor since he took the helm of the 1.3 billion-strong church in 2013, is a key driver of the new investment trend.
Other UK Media Coverage on Impact Investment
- Millennials are set to inherit a £1.2 trillion windfall from baby boomers in the next 30 years, according to a recent study by Sanlam UK.
- Barclays’ latest Impact Investing Report, which surveys 2,000 investors, shows the number of investors that have made a sustainable investment has increased by two-thirds, to 15%, since 2015.
- However, this increase has been driven by millennials.
- Almost half of respondents under 40 had made an impact investment.
- That compares to 9% of those between 50 and 59; and just 3% of those aged over 60.
- Further, millennials said they would allocate three times as much of their portfolios to impact investing as the over 60s pledged.
The first 4 trends were noted following a detailed working group report by GSGII, based on a country by country analysis, through which a number of trends relating to policy tools within impact investment were identified. Out of these, 4 such trends were picked up which were implemented or are most priortized across all the countries covered in this report.
The fifth and sixth trends were noted from the report which presents findings from the Global Impact Investing Network’s ninth Annual Impact Investor Survey reflecting 266 respondents’ impact investing activities and perspectives on industry development, including new sections exploring human resources; diversity, equity, and inclusion; and the role of governments in supporting the industry. The report also analyzes trends among the subset of 83 four-year repeat respondents. These trends were selected out of others mentioned in the survey because the other trends were more inclined towards being presented as a result of the survey while these two were more of a trend than just a survey result.
The seventh trend was found as the common opinion from 50 thought leaders and practitioners in the impact investment space from source #3.
The only trend we identified (8th Trend) as covered by the UK media was "an increased level of interest for Catholic based organisations in impact investing." We found this trend in the UK Reuters website which generally covers other UK news as well. We also found the key driver to this trend. This was taken as a trend since many Catholic-based organisations across Vatican City and the USA connected with Argentine Pope Francis, are now taking an interest or are already shifting towards impact investing. However, this was the only trend covered by the UK media and the other identified trends were not.
In order to find out the trends covered by UK media we considered every possible UK media online source like BBC, The Sun, Telegraph, Guardian, Independent, Mirror, Reuters, Morningstar, etc., out of which we only found one trend which was covered.
The other trends were not covered by UK Media.
The driving factor for the identified first 7 trends were not available since these were a part of report, survey, and expert opinions which mainly focused on current trends in brief. We were limited to sources covering the past one and half years. While we did look for the same in the UK news database, into regional news portals and available reports, the only data that came out was the trends but not the factors driving them.