The world of impact investing is maturing and growing, while investors struggle with the effect of AI on their work. Those were some of the findings of the latest annual survey of impact investors by the Global Impact Investing Network (GIIN), a research and advocacy organization.
Dean Hand
The GIIN
The sample included 305 impact investing organizations; each manages more than $10 million in impact assets or has made five impact investments since launching.
Bigger Investors
About 92% of assets came from larger investors, according to the research, with more than $500 million allocated to impact investing strategies. “They clearly are playing a role in driving some of this growth,” says Dean Hand, the GIIN’s chief research officer. And they’re increasingly investing in more mature, growth stage companies, which suggests stepped up activity by institutional investors, according to Hand. Impact assets overall grew at a compound annual growth rate of 14%, a slight increase from the year before.
Related to that trend, investors are using more complex asset classes for their impact investments. Public debt, real assets and public equity have all grown over the past five years, at a compound annual growth rate of 32%, 27% and 19%, respectively, although private capital is still the most used.
Respondents also cited client demand as a significant area of progress over the past five years. (They reported considerably less progress regarding clear guidance from regulators on requirements for impact investing and suitable exist options).
AI: Hesitation for Now
For the moment, investors appear to be reluctant to join the AI frenzy overtaking the business world. Some 38% said they need to understand more about the technology before they start to deploy it. Over a third reported wanting to see a sufficient track record before using it.
At the same time, responses indicated that, a year from now, the landscape could be very different. While only 3% said there were no barriers to integrating AI processes in their impact investment strategies, over one-quarter expected to be using AI in their strategies over the next year.
According to Hand, the potential for AI in the area of measurement is particularly promising. “AI can create an enormous amount of efficiencies in the system for impact investors, particularly in the use of gathering impact performance data,” she says. “There’s an enormous potential to use AI to be able to advance things like impact measurement and management.”
Climate Action
Results presented a bit of a puzzle regarding climate investments. While the energy sector has attracted heavy investment in the past and continues to be a big area of investor attention, there’s been a decline over the past five years. That is, while there was a slight drop in climate action investing over the past five years, most recently, such investing reached a peak: The percentage of investors making at least one allocation to climate investments was 52%. “Whenever you come across a figure that seems to be contradictory, it raises questions as to what’s really happening,” says Hand. “It makes sense to me that as climate issues become more and more obvious, investors will change their strategies to address those challenges.”
Other Findings:
Investors reported that rising interest rates, inflation and climate change had the most significant effects on their impact strategies in 2023.
Seventy-four percent of investors said they target market-rate returns.
The majority of investors reported satisfaction with financial performance and 90% reported satisfaction with impact performance, which outperformed or was in-line with expectations.
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{URL}https://www.forbes.com/sites/annefield/2024/10/31/impact-investors-are-larger-skeptical-of-ai-for-now-finds-the-giin/{/URL}
{Author}Anne Field, Contributor{/Author}
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