Impact investors are worried their sector could become too big for its britches, according to a new survey.
In the seventh Annual Impact Investor Survey by the New York-based Global Impact Investing Network (GIIN), impact investors expressed concern that the size of the impact investing industry could harm their ability to target investments that could make social or environmental change.
As large-scale firms enter the space, 71 percent of the survey’s respondents said that impact investments could suffer from mission drift or “impact dilution.” Half of the survey’s participants also were worried that capital could start to shift away from smaller intermediaries as larger companies start to dominate.
“We need to explore approaches to protect the integrity of the industry and keep impact at the forefront, while also welcoming new entrants,” said the report. “The GIIN’s vision of the market is not to integrate impact into traditional capital markets, but to integrate the capital markets into the global pursuit of social and environmental progress.”
As impact investing grows as an industry, the GIIN’s respondents expressed concern about the lack of appropriate capital across the risk/return spectrum, and scarcity of exit options.
As a result, some impact fund managers told surveyors that they were having difficulty raising capital: 73 percent of the developed market-focused fund managers said that they were having difficulty raising capital due to investors’ liquidity concerns. Emerging market-focused impact managers expressed even more liquidity challenges, with 92 percent responding that they were having difficulty raising capital.
The growth story is not all bad, as respondents did not indicate that they were feeling pressured about competition within the space. The survey participants also noted improvements in the ease of locating professionals with relevant skill sets, research and data on impact investing products and high-quality investment opportunities.
The 2017 survey involved 209 participants managing more than $114 billion in impact investing assets. Three of those respondents were major holders of impact investments responsible for the lion’s share of the assets among survey participants, totaling almost $92 billion, while one respondent declined to reveal their impact investing assets.
The remaining 205 respondents were responsible for $22 billion in nearly 8,000 different impact investments in 2016, with plans to increase their allocations by 17 percent throughout 2017 to $25.9 billion.
Most of the respondents’ impact investments, 67 percent, were made by fund managers, with a significant amount also coming from foundations, 11 percent. Banks, development finance institutions, family offices and pension funds made up a 4 percent or less of the respondent sample.