Investors are thinking green, beyond the dollar signs, according to a new report.
The report from J.P. Morgan and the Global Impact Investing Network (GIIN) says investors will up their participation in impact investing by 19 per cent this year - taking into consideration the social and environmental - rather than just fiscal - payoff from where they plant their money.
The report says that impact investing will see significant growth this year - up from $10.6 billion in 2013 to $12.7 billion in 2014; with a 31 per cent increase in the number of deals.
The survey of 125 of the largest global impact investors - including pension funds, fund managers, banks and foundations - also reveals that micro-finance and other financial services each account for about 20 per cent of impact investment assets, followed by energy at 11 per cent and housing at 8 per cent.
Private markets hold the bulk of allocations with 44 per cent of assets in private debt and 24 per cent in private equity.
Of the $46 billion invested by survey respondents, 70 per cent is in emerging markets, while 30 per cent is in developed markets. Investors are showing growing interest in food & agriculture, healthcare and financial services (excluding micro-finance) investments.
While responsibility, efficiency and client demand were identified as the main attraction to this type of responsible investing, a lack of quality deals and appropriate capital are the key challenges.
As for financial returns, 91 per cent of investors reported them beating or being on par with their expectations. While 99 per cent of those surveyed said the social and/or environmental impacts met or exceeded their expectations.
"From the results, we see the rise of a vibrant impact investing marketplace, where investors are targeting a wide variety of social, environmental and financial objectives and finding themselves satisfied with the results. As collaboration between investors, governments and other key participants continues in 2014, we remain optimistic about the growth and development of the practice," said Yasemin Saltuk, director of research for J.P. Morgan Social Finance and co-author of the report, in a release.
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