Of course, not all impact investors seek market rates of return. Some intentionally target below-market returns given the nature of their strategies. These so-called concessionary impact investments can be a sustainable funding source for organizations historically reliant solely on grant funding.
For those who do want to be assured of market-rate returns, the studies highlighted in the GIIN report really just mark the beginning. The impact investment industry’s youth (it officially turned 10 this year) and a growing number of new entrants without much of a track record means the scope and depth of the research is still limited.
“We still need more information,” Mudaliar says. “Impact investing is still a growing and evolving industry, and as it evolves we need more data not only on investment performance but on impact performance. We call on investors and other researchers to continue to dedicate efforts to build on this body of evidence.”
Here are a few more of the report’s highlights:
• A Wharton Social Impact Initiative study evaluated the performance of 32 private equity impact investing funds with $1.7 billion in assets and found gross internal rates of return of 9.2%.
• A McKinsey report on 48 exits from private equity impact funds in India found investments achieved a weighted average return of 11%.
• Symbiotics looked at 44 microfinance vehicles; the debt funds experienced a pooled average yield of 6.9%.
• An Impact Investing Australia report looked at financial performance data on 54 private debt investments in Australia and found a weighted average of gross returns of 7.9% per year since inception.