Lack of Understanding One of The Main Barriers To Impact Investment
Global, November, 09 2012 -
Lack of understanding of the asset class and requirements of a minimum investment size far beyond the capacity of the investment opportunity are two of the main barriers for pension funds investing in ‘impact investment’, research by Survey Finance and Finethic has found.
The survey tried to understand why take up of ‘impact investing’, defined as investments into social businesses that deliver financial returns alongside measurable social impact, has been slow among UK pension funds, compared to funds in the Netherlands, Scandinavia, Switzerland and the USA.
Results showed that other barriers included a low level of awareness, a lack of ‘branded’ asset managers and peer investors, the perception that the ‘gatekeeper’ consultant would not approve, and a misunderstanding that such investments would automatically mean a decline in returns.
Currently 23 per cent of the 47 organisations surveyed include ‘impact investment’ in their pension fund portfolios, but respondents expect this to rise to 48 per cent in the next 12-24 months. However the size of capital remains low with only two respondents reporting an investment of more than £200m in the asset class.
The majority of current investments are in ‘green’ energy, with just one respondent invested in social housing, but the balance is expected to shift to include microfinance and infrastructure as respondents widen their range of investments.
“We foresee these pension funds investing in high quality impact investments in clean energy, microfinance, social housing, sustainable forestry and land, and in their local communities. If they succeed (and awareness grows), we expect them to be followed by other early adopters and then the ‘early majority’ as the impact investment becomes mainstream,” the report stated.