Impact investing focused on deals aimed at doing some social good, not just making profits, doubled in the last year to an estimated $228 million worldwide, according to the 2018 Global Impact Investor Network (GIIN) Investor Survey.
Jean Case, CEO of the Case Foundation, said on release of the report, “The past decade of growth in the impact investing movement has been impressive. The GINN’s announcement that impact assets under management have doubled in the last year to an estimated $228 billion is further proof that impact investing is being embraced broadly.”
She added, “We are seeing the number of investors, entrepreneurs, corporations, foundations and nonprofits investing with the intention of generating both financial and social returns increase like never before.”
Even so, she said, “It is still early days and for impact investing to move from niche to mainstream, we need to continue bringing more investors and drive more capital to investing.”
Taking Google, Facebook to task
Farnum Brown, the Durham-based managing partner and chief strategist at Arjuna Capital, which is a pioneer in impact investing, tells WRAL Techwire, “We’re in that acceleration phase where this way of investing becomes the norm.”
Aruna is named after the hero of the ancient Indian epic poem, the Mahabarata, who asks Krishna to help him determine the path of right action in a morally complex world. It works with high net-worth individuals, families, and foundations to create a suite of sustainable investments.
Farnum Brown, managing partner at Arjuna Capital. Courtesy, Arjuna Capital.
Brown started doing socially responsible investing way back in 1987. In addition to Arjuna, which he co-founded in 2003, he has worked with “Some of the most progressive musicians in the world,” including the Beastie Boys and Nivana, on public shareholder campaigns promoting social responsibility.
Brown focuses his activism on bringing major digital media companies like Google and Facebook to task for lapses in social responsibility at shareholder meetings. He makes the case that fake news, gender equality, and sexual harassment are not only socially irresponsible, they affect a company’s financial health.
“We try to underline the notion of the double bottom line in this field, financial returns and social returns. Economic vitality and social and environmental responsibility are interdependent registers of society’s health. They all influence each other. We advocate in terms of profit.”
Natasha Lamb, a managing partner at Aruna, demonstrated the effectiveness that approach with natural gas producers, who took the issue of natural gas fugitive methane. Natural gas is 90 percent methane and if more than 3 percent escapes between well head and combustion, it becomes a much more powerful greenhouse gas than coal.
Lamb went to natural gas producers and made the point that dollars were flying out of their pipelines in addition to the fact that the leakage could ruin the industry’s reputation as being cleaner than other fossil fuels. The companies realized, Brown said, “They were not only putting their reputation as a preferable fuel source in jeopardy, they were losing money.”
Momentum shows a signal of something bigger
Introducing the 2018 impact investor survey, Abhilash Mudaliar, research director of GINN, wrote, “The data in the survey show momentum for the industry. But at the GINN, we also believe they’re a signal of something bigger. It portends a shift in the broader financial markets, where it is becoming increasingly unacceptable to invest without regard for the social and environmental impacts of one’s investment choices.”
Among the key findings of the GINN annual impact investor survey:
- The market is diverse in organization type, geographic location, investment focus, and asset class.
- The impact investing industry is growing. More than half of respondents made their first impact investment in the past decade.
- Impact investors show a strong commitment to measuring and managing impact.
- Overwhelmingly, investors report performance in line with both financial and impact expectations.
- Impact investors acknowledge changes that need to be addressed.
- The 226 respondents to the survey currently manage $228.1 billion in impact investing assets.
- More than one in three respondents are organizations in conventional investing markets that have also begun impact investing.
- Respondents reported a total of $447 billion of capital in 333,687 deals since they began impact investing.
- Collectively, 225 respondents invested $35.5 billion into 11,136 investments during 2017.
- They plan to invest $38.5 billion in more than 11,700 investments in 2018.
- About 70 percent apply a “gender lens” to thir investment process and nearly three quarters (72 percent) address climate change.
Retail products for impact investing
A 2017 Morgan Stanley report, “Sustainable Signals,” said 75 percent of 1,000 investors it surveyed were interested in investments that aim for market-rate returns while pursuing positive social or environmental impact. So, the GINN survey notes, “2017 has seen an influx of retail products for impact investors.”
They include:
Swell Investing, an online product that allows investors to select a specific impact theme such as green tech, clean water, zero waste, renewable energy, disease eradication or health living.
Barclay’s Multi-Impact Growth Fund, a fund of funds that also allows individuals to invest.
The Low Income Investment Fund, a U.S. Community Development Finance Institution.
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