Private debt or fixed income instruments are the largest asset class in impact investing, a report has found.
According to a report by the Global Impact Investing Network (GIIN) and Symbiotics, over a third of impact investors’ reported assets under management (AuM) were invested in Private Debt Impact Funds (PDIFs) and Community Development Loan Funds (CDLFs) in 2016.
Impact investments are made into companies, organisations, and funds with the intention of generating social and environmental impact alongside a financial return.
Funds ranged in size from $3 million (€2.4 million) to more than $1 billion with a median just below $100 million as of December 2016, the report said.
Total AuM in the sample was $10.6 billion as of December 2016, registering annual growth of 15% between 2012 and 2016.
Both sets of funds produced stable returns with PDIFs averaging a 2.6% return per annum since 2012, and the 90th percentile registering a 10% return in 2016.
CDLFs paid an average of 2.9% on their notes, with the 90th percentile registering a 3.6% return in 2016.
Average portfolio yields, the major source of income for PDIFs, remained stable throughout the period, varying between 6.0% and 6.4% for all funds.
Amit Bouri, GIIN chief executive officer, said: “Impact investments in private debt are an attractive option that can yield a stable return and drive capital toward powerful global progress.”
Abhilash Mudaliar, GIIN research director, said interest and activity in impact investing had grown rapidly in recent years aided by a growing body of evidence on financial performance that impact investments can generate returns that are competitive with conventional investing.
He added: “This report shows that the same is true in the private debt asset class. Continued investor willingness to share performance data will be essential to drive exponential industry growth and ensure the channelling of capital towards critical social and environmental challenges.”
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