—Karen DeMasters
Impact Investors See Food, Agriculture As Top Causes
Feeding the world’s nearly 7.5 billion people while minimizing damage to the environment ranks as the challenge impact investors are most likely to pour money into this year, with roughly one-third planning to increase their allocations to food and agriculture, according to a survey by the Global Impact Investing Network (GIIN).
Other areas where impact investors—who seek to solve social and environmental problems while turning a profit—see increasing opportunities include clean energy and health care. The regions they’ll be giving the biggest boost in capital to are sub-Sahara Africa and East and Southeast Asia.
“These investors consider impact investing to be a powerful tool when it comes to furthering economic development in emerging markets, where basic services like food and agriculture are a critical need,” said Abhilash Mudaliar, GIIN research director. “When you look at some of the other sectors highlighted, such as education, health care, energy, these are all critical basic services that can drive improved socioeconomic outcomes in these regions. And food and agriculture in particular play a critical role in livelihood support, given the high proportion of people in these markets that derive their income from agriculture.”
The network surveyed 157 investors managing $77 billion in impact assets and found that nearly 80% intend to maintain or increase their commitments in 2016. That translates to a 16% jump in capital committed—to a planned $17.7 billion this year from $15.2 billion in 2015—across various sectors, geographies and asset classes.
The bulk of 2015 investments, $7.2 billion, came from asset managers, who said they invested primarily on behalf of family offices and foundations. Direct investments from foundations, banks, development finance institutions, family offices, pension funds and insurance companies made up the rest. In all, these investors committed capital to 7,551 deals in 2015 and plan to commit to 11,722 deals in 2016.
The survey results do not represent the entire global impact investment market, which is difficult to measure, but they do give some indication of its growing strength. Interest in the discipline is increasing largely because of changing attitudes—the realization that governments and philanthropy can’t solve today’s megaproblems alone and that, in fact, there is money to be made in solving them.
Survey respondents expected an average gross return for debt of 5.4% in developed markets and 8.6% in emerging markets. On the equity side, they expected an average gross return of 9.5% in developed markets and 15.1% in emerging markets.