Private equity is the most popular way investors gain access to the impact space, with three out of four (72%) surveyed investors specialising in this investment class, BlueEarth‘s Impact 360 Survey has revealed.
The survey – which reports on the evolving landscape of impact investing and incorporates insights from 130 global impact market participants – found that private equity came some way ahead of venture capital (44%) and private credit (36%) in impact investment decision making. Fewer than one in ten investors surveyed (8%), however, enter the impact space through listed equities.
Meanwhile, almost three quarters of respondents believed impact investing would become a mainstream institutional investment strategy within the next 10 years, with 16% of respondents saying it is already mainstream.
“It is clear that investor interest in the impact investment sector is growing at a remarkable rate. This is no doubt driven by the fact that the complex issues facing our world need impactful solutions, something which we outlined in our recent Impact Report 2023,” writes Stephen Marquardt, CEO of Blue Earth Capital.
“The findings in our BlueEarth Impact 360 survey are both enlightening and encouraging as the survey highlights the growing confidence among investors in the potential of impact investing to drive meaningful change. The data suggests that more and more investors are aligning their portfolios with their values, seeking to generate positive outcomes alongside financial returns.”
While impact investors see attractive investment opportunities across the globe, Africa and Asia have the edge. Some 62% of respondents said Africa has the greatest impact investment opportunity, while 61% cited Asia, in a poll where investors could select all options that applied. The majority of respondent organisations (69%)
access impact opportunities through managers in Europe.
However, one third of respondents (32%) believed that the broader finance community has a poor understanding of the impact space. This includes a limited knowledge of the key characteristics of impact investing, the investment opportunities, the impact agendas of businesses and the investor skill sets required for the space.
In terms of the performance of the impact funds, the majority (70%) said they would consider an impact fund a “failure” if it outperforms its impact KPIs but does not meet its financial return expectations across the fund cycle. In contrast, over half (56%) believe an impact fund fails if it outperforms financially but does not meet its impact KPIs.
Regarding impact industry opportunities, 39% of respondents said they are drawn to impact investing to primarily help address environmental and/or social challenges, while only 16% said it was to achieve attractive financial returns. Taking action on climate change is the biggest focus for 29% of impact investors, with sustainable agriculture coming in at 14%, and infrastructure, financial inclusion and healthcare at 10%.
