Impact investing is increasingly taking hold, as allocators recognise the return benefits, and this presents opportunities for established international financial centres.
So says a white paper from Guernsey Finance – Redrawing boundaries: How impact investing is making a difference. Based on interviews with managers, investors, law firms and industry experts, the paper explores some of the regulatory and investor-led drivers behind impact investing.
The asset class is projected to account for one per cent (or $2 trillion) of globally invested capital by 2025, opening up opportunities for major financial centres to support such strategies.
The paper debunks popular notions about impact investing, in particular the myth that returns are often compromised in exchange for a social good or advancement.
Survey findings
Guernsey Finance cites findings by the Global Impact Investing Network’s Annual Impact Investor Survey, which reports that 91 per cent of respondents found financial performance was superior or in line with expectations, while 98 per cent said impact performance was better or on a par with expectations.
Returns have been given a boost by financial innovation in the sector, where a number of bespoke and interesting financial instruments are being used, including social impact bonds, charity bonds and blended finance structures.
Impact investing is continually changing, with new players entering the market, including private equity, private debt and venture capital sectors or firms transacting in real assets accounting for the majority of fund managers participating in the space.
Justin Sykes, Managing Director at Innovest Advisory, who was interviewed for the white paper, commented: “Impact investing used to be the preserve of HNWIs, private wealth or family offices but we are seeing a broadening of the base.
“This has happened due to greater awareness of the subject matter and recognition that investors can make risk-adjusted returns through a wide range of products.
"As such, we are seeing private banks, insurance companies and pension funds move into impact investing.”
• The white paper can be viewed here