GIIN Impact Investor Forum 2016: 10 things we learned

1 IMPACT INVESTING IS AT A ‘TIPPING POINT’
The world’s largest-ever gathering of impact investors opened with a call to arms. Nick O’Donohoe, left, senior advisor of the Gates Foundation, told the Global Impact Investing Network Investor Forum 2016 that impact investment could be “transformational” in solving some of the world's most intractable problems such as climate change and Third World poverty. “Impact investment is at a tipping point,” he said.

2 ASSETS UNDER MANAGEMENT ARE EXPANDING STRONGLY…
A report by the Global Impact Investing Network unveiled on the opening day of the conference showed that assets under management in impact funds are rising by 18 percent a year, up from $25.4 billion in 2013 to $35.5 billion in 2015. Seventy percent of the assets are allocated via private debt or private equity.

3 …GIVING IT AN INCREASINGLY VITAL ROLE
O’Donohoe likened the growth in the use of private capital to generate a social and environmental impact to the early days of the private equity, venture capital and hedge fund movements. Impact has become a “critical component” in investment decisions, he said.

4 BUT THERE IS NO ROOM FOR COMPLACENCY

“The challenges facing the world’s most marginalised populations require immediate action,” Amit Bouri, left, the chief executive of the GIIN told delegates. The impact sector needs to grow in “leaps and bounds” if it is to tackle such issues as the 220 million children in South Asia breathing toxic air, Bouri said.

5 PENSIONS ARE INCREASINGLY INTERESTED IN THE SECTOR

Delegates included representatives of many of the big pension funds who said that they had turned to impact investing out of a realisation that they had a responsibility to deliver positive social change from their investments. Peter Borgdorff, director of Dutch pension fund Pensioenfonds Zorg en Welzijn, said that it had switched to a strategy which places a greater emphasis on social outcomes. “When we talk about impact, we want to make the world a better place,” he told a panel.

6 BARRIERS TO GROWTH REMAIN
The conference also highlighted the potential barriers to growth in the impact sector, notably a lack of liquidity and the difficulty of measuring impact. “We still don’t speak a common language,” said Linda Broekhuizen, right, chief investment officer of Dutch asset manager FMO, which has invested in socially responsible projects for more than 45 years. “I dream of seeing financial reporting standards for impact.”

7 LACK OF SCALE IS AN ISSUE
Another criticism was the lack of scale of many of the projects. One answer put forward by Grete Faremo, right, executive director of the United Nations’ UNOPS programme, is a larger role for partnerships with overseas aid institutions who can provide seed capital and financial guarantees for impact investments. “There’s a colossal amount of capital available for projects that deliver impact,” she said in a keynote address on the second day of the conference.

8 EXITS NEED TO BE ETHICAL

One of the major discussion points was the difficult issue of how investments can be exited without threatening the social and environmental objectives of the business. “Exiting after six years is always a problem because the companies are immature,” said Jasper Snoek, above, the chief financial officer of the Doen Foundation, a Dutch impact investor. Longer exit times were one option. Another is to have some core strategic shareholders who are tasked with ensuring “mission protection” while holding a minority stake, he said.

9 INVESTORS ARE HAPPY WITH PERFORMANCE
Investors report broad overall satisfaction with both the impact and financial performance of their investments. GIIN’s 2016 annual impact investor survey found that 98 percent of investors said that impact performance was either in line or exceeded their expectations and 89 percent said financial performance either met or bettered their expectations. Private equity investments had gross expected returns of 17.6 percent and private debt vehicles were expected to return 5.2 percent.

10 MICROFINANCE IS THE MOST TARGETED SECTOR

Microfinance and financial services are the most common impact investments with 38 percent of total allocations, Energy, housing and food and agriculture were the next three largest sectors. There are signs, though, of diversification with the education and technology sectors both showing strong growth.