The latest data from our industry’s biggest survey, by the Responsible Investment Association of Australasia, confirms the trend towards impact investing. Here’s what jumped out to us.
- $19.9 billion: value of Australian impact investment products as at 31 December 2019
- ~250% growth in the last two years.
- 111: number of impact investment products widely on offer to Australian investors as at 31 December 2019
- 87% of impact investment products target environmental outcomes.
- That’s largely green bonds ($17b)
- Impact investment products targeting social outcomes have increased AUM tenfold to $2.5 billion
Performance (Impact & Financial)
- 5.3% p.a. return: 2018–2019 weighted average annualised across impact investment products in different asset classes.
- (Check out the report for breakdowns by asset classes: Pretty good)
- The report doesn’t cover post-bushfires, COVID returns, but early indications, aside from the report, are that ESG investments have done quite well.
- 5 million tCO2e abated/ avoided and 84,000 GWh renewable energy produced
- 2,000 homes for people on low to moderate incomes, living with disability, or transitioning out of homelessness
- 483,235 Megalitres of water saved, treated or delivered
- 93% of investors’ impact expectations are being met or exceeded by their current impact investments
- 92% of investors’ financial expectations are being met or exceeded by their current impact investments
- 76% of impact investors expect competitive or above market rates of returns on their impact investments
- 90% of impact investors believe that impact investing will become a more significant part of the investment landscape
- There’s greater awareness of impact investing from people not yet active in the market.
Barriers to Impact Investing:
- For already-active investors the barriers are; not enough deals; not enough evidence of impact; or evidence of financial performance/record.
- For investors who know about impact, but don’t currently invest for impact: lack of reliable research, information and benchmarks; needing more evidence or a longer track record of financial performance; or a lack of client/member/trustee demand.
The report briefly touches on the underlying drivers for the growth of impact investing, which are a bit circular: There’s more demand, there are more fund managers, and mainstream institutional investors are grappling with the responsibility of ownership.
The report also names “context”, which is a tiny word for some massive forces that are worth expanding upon: To cite the example of IIG’s growing community, investors are more motivated than ever by their observations of the world. To name two; the bushfires and climate emergency, and the social fallout from the Covid-19 pandemic.
As well, there’s growing awareness that capital has a role to play. Our industry has done a great job of educating decision-makers that they can integrate their capital decisions with their values.
It’s a strong report, and as usual, the data is worth digging into. Our congratulations to the team at the Responsible Investment Association of Australasia.