In 2020, we interviewed and surveyed foundations and our stakeholders to better understand how they are thinking about impact investing. In particular, we wanted to know their needs for rates of return, liquidity, etc. and what market gaps may exist. We also reviewed the state of the US impact investing market based on the latest available data.
What did we learn about the market? For one thing, impact investing is continuing to surge, despite the Covid-19 pandemic. The Forum for Sustainable and Responsible Investment (USSIF) found that ESG investing in the US grew dramatically in 2020 to $16.6 trillion AUM.
A majority of these funds are in public markets, and $4.5 billion of the total assets are managed for retail investors.
Impact investing, or investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return, is a segment of this market. It is also more difficult to size because it is largely in private markets. The Global Impact Investing Network (GIIN) found that US impact investing (from its members) more than doubled from $10 billion in 2015 to $21 billion in 2019.
We carried out our research from June through November 2020. This work included:
A market study utilizing publicly available, secondary research
Primary research consisting of interviews and surveys with 15 foundations, 13 faith-based organizations and 64 individual investors
What did our primary research reveal? We found similar interest in sustainable and impact investing among foundations and our stakeholders:
71% of respondents have made socially responsible and/or impact investments
41% of the average portfolio of respondents is invested in socially responsible and/or impact investments
Notably, our stakeholders are interested in high-impact, low-return investments.
However, even as impact investing continues to grow significantly, an important gap exists in the market. While most respondents discussed their investments in Environmental, Social, and Governance (ESG) funds, they also noted a lack of accessible impact investment options for retail investors. Our market study found only 18 providers of retail impact investment products in the US, and only 10 of them offer a product that invests in low-income countries.
Over the next month, we will be publishing the findings from our research focusing on three themes:
Preferences for retail impact investors
Size and scale of the retail impact investing market
Preference and role for institutional investors in impact investing
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