New Data on Australian Impact Investing

Impact Investment Keeps Growing. (But What Are The Reasons?)

Published: June 5, 2020

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.

Market Size:

  • $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

Market Sentiment.

  • 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.

But why?

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.