Impact investing is growing in importance among the alternative investing community, according to a new survey by the Chartered Alternative Investment Analyst (CAIA) Association.
Impact investing includes accentuating environmental, social and corporate governance initiatives through investments. Assets under management in impact investments have grown 18 percent year-over-year for the past three years, according to the Global Impact Investing Network (GIIN). Total industry assets under management in traditional private equity impact investments are estimated to be around $80 billion.
The fact that impact investments are making headway among the alternatives asset class should come as no surprise as these investors typically have broader investment parameters than traditional institutional managers, who must abide by more strict investment policies.
The CAIA survey showcases the tailwinds driving impact investing’s growth: More than three quarters (77 percent) of respondents to the survey agree that responsible investing is more important than it was three years ago, while 78 percent anticipate it will be more important three years from now. Adoption of industry standards (71 percent), pressure from institutional investors (67 percent) and positive investment return outcomes (64 percent) will be the largest drivers of greater adoption of responsible investing and ESG approaches, according to survey respondents.
“Responsible investing seems to be at a tipping point right now. It is garnering increased interest and momentum, which will likely accelerate in the years to come,” says William Kelly, chief executive officer of CAIA.
Such growth will require tighter industry standards, however.
“To support this demand, a more institutional infrastructure is needed, including common standards, increased information and education,” Kelly says.
Education and best practices are already being baked into the Chartered Financial Analyst Institute’s curriculum and the CAIA’s education program. Moreover, impact investing industry events are proliferating.
CAIA survey respondents say the biggest benefits of responsible investing are ethical/values alignment (71 percent), meeting client or constituent requirements (58 percent) and improved marketing/brand reputation (50 percent).
Despite the interest among asset owners, asset allocators and consultants in incorporating ESG factors into their investment practices, only 44 percent of those surveyed say their firms have responsible investing policies, while 44 percent say their organizations do not have such policies.
The survey was conducted in January. Organizations’ assets under management ranged from 20 percent managing less than $1 billion, 18 percent with $1 billion to $10 billion, 13 percent with $11 billion to $50 billion, 7 percent with $51 billion to $100 billion and 25 percent with more than $100 billion. Seventeen percent were consultants who did not manage money.
