Impact fund managers increasingly ambitious on financial returns, new listing shows

Laura Joffre 23rd February 2021

Impact fund managers included in this year’s ImpactAssets 50 database are increasingly targeting higher investment return rates, the latest listing reveals.

Published by impact financial services group ImpactAssets, the ImpactAssets 50 list (IA 50) is a global database of impact investment fund managers updated annually that aims to bring more investors and their financial advisors into impact investing.

This year’s list, published today, shows that a total of 87% of IA 50 fund managers targeted investment returns at market rate or above, compared with 78% last year. As many as 69% were aiming for market rate return, and 17% above that.

A great part of these ambitions are being achieved, as 92% of impact funds managers across the board (also including those targeting concessionary rates) delivered either in line with or above their target returns.

“[What] we've seen has been a real focus on market-rate or in some cases above market-rate financial performance for these funds,” said Jed Emerson, ImpactAssets senior fellow and IA50 review committee chair. “I think it's important because when we talk broadly about impact investing, I think a lot of people misunderstand and think that means that you're talking concessionary financial return, that you're having to give up something in exchange for creating impact. And these funds have shown that that is not the case.”

A lot of people think that you're having to give up something in exchange for creating impact. These funds have shown that that is not the case - Jed Emerson

“What's striking is the number of [impact] funds today that are really going straight on for financial performance that's competitive with similar types of funds and traditional strategies,” Emerson added.

This year’s listing also shows a growing impact investing space. The total assets under management among selected IA 50 fund managers jumped to a record $228bn, up from $181bn last year. This figure has shot up more than 3,000% since IA 50 was created 10 years ago up from $6.8bn in 2011.

The database is not intended to be a comprehensive list of all impact investors and is not representative of the entire impact market, as it relies on a process of application and selection for fund managers to be included. “Our intent is really to help people understand and get a feel for the breadth of activity that's in the space, and really get more of a landscape overview,” said Emerson. “It's a starting place for investors and for their advisors.”

The IA 50 list includes experienced impact fund managers with a minimum three-year track record and $25m assets under management or more.

Since last year, ImpactAssets has also published the Emerging Impact Manager (EIM) list that identifies newer organisations and firms – often run by people with experience in the impact investing field – that demonstrate innovative ideas to create impact. The list has grown from 16 to 41 this year, as the quality and number of applications received increased, according to Erin O’Brien, senior associate of investments at ImpactAssets. The total EIM assets under management rose from $397m to $917m.

The list also reveals that the past year’s events have affected priorities for selected fund managers. Covid-19 has led to an increased focus on smaller businesses and communities, as seven community development financial institutions (CDFIs, organisations which provide loans and support to those who find it hard to access finance from mainstream sources) have entered the list. Discrimination against marginalised groups has also emerged as a priority, with eight emerging fund managers focusing on people of colour, women, and prison inmates, compared with just two last year.

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