The impact investment sector could see rapid growth in funds and assets over the next five years, according to research released this week by Impact Investing Australia and the University of Melbourne.
The research shows that the sector has a preference for real assets that deliver market rates of return, and for investments that have documented and measurable social and environmental benefits, the researchers said.
However, the survey showed the investors perceive there is a shortfall in investment opportunities in the areas the majority seek to have an impact – housing and homelessness, children and issues affecting young people, clean energy, education, health and medical research, and Indigenous people and communities.
The Impact Investing Australia 2016 Investor Report shows that of 123 investors surveyed, 41 per cent are already active impact investors looking to achieve social and environmental benefits through the deployment of capital. These investors are collectively aiming to triple their allocation of fund to impact investments over the next five years.
The majority of non-impact investors indicated they were likely to consider social, environmental and cultural impacts as metrics for investment decisions over the next five years.
Respondents collectively managed more than $333 billion of Australia’s total funds under management, and included institutional investors, trusts and foundations, not-for-profits and individuals. Only 46 per cent of those surveyed were signatories to the United Nations Principles for Responsible Investment.
Those active in impact investing already reported that the majority of their investments had delivered both social impact, and 54 per cent had delivered financial performance in line with investor expectations. A further 12 per cent reported investments had over-performed, and only 16 per cent said that they had underperformed.
“This report makes an important contribution to understanding how the demand for impact investing is shaping in Australia,” Impact Investing Australia chief executive Daniel Madhavan said. “It provides new insights into investors’ awareness and interest in impact investing, as well as the future prospects and challenges facing this growing field.
“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.
“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.”