Investors are poised to devote more assets to impact investments, but they and their advisors are struggling with a key component of these products: measuring their actual impact, according to a new survey.
"Despite significant appetite for impact investing, there are daunting barriers to greater adoption," said the authors of a report by the Rockefeller Foundation. "One is the lack of standardization in measuring the 'impact' of investments."
Sixty-one percent of investors and 34 percent of advisors said they found it difficult to measure the 'impact' component of impact investments, according to the foundation's survey.
"Measuring the carbon footprints of investments, for example, is not straightforward," the report stated.
The report, based on an online survey of 200 retail investors and 300 advisors in the U.S. and Europe, found that there continues to be a pent-up demand for impact investments, particularly among millennial investors.
Among investors surveyed who were aware of impact investments and their focus on enterprises that are environmentally sustainable, 78 percent said they are already investing in impact investing funds and products.
Also among that group, 55 percent said they expect to increase their impact allocations to between 6 percent and 20 percent over the next two years. That would be up from a range of 4 percent to 5 percent that most impact investors now fall into, the foundation said.
"This trend has not gone unnoticed by the advisory community: One in four advisors reports a growing desire among retail investors to incorporate impact investments into their portfolios," the report stated.
Yet the impact investing industry will have to mature further to take advantage of this investor demand, according to the report.
Among the industry's greatest challenges is finding concrete and standardized ways to convey the impact these investments actually have, according to the foundation, which noted that a recent CFA Institute report found that the industry currently lacks a uniform standard for quantifying impact.