Impacts impress investors but they just can't get the staff
Investors say their impact investments meet—or beat—their expectations as the global $502 billion sector grows and matures, but they struggle to find the right people to manage their projects.
More than 90% of respondents surveyed by the Global Impact Investing Network (GIIN) reported the performance of their impact investments was in line with, or exceeded, both their impact (98%) and their financial (91%) expectations. Some 15% said their impact investments had outperformed their expectations since inception. Both impact and financial factors motivated impact investors to enter the market.
However, more than half of respondents said they struggled to source talent for impact management and it remained a challenge for the industry. Some 41% believed there was an inadequate supply of professionals skilled in deal making and structuring. More than 40% noted difficulties in attracting or retaining senior-level investment management staff, and more than a third face challenges attracting or retaining senior-level staff.
Most respondents (40%) cited a lack of “competitive compensation” as a reason for impact recruitment and retention problems. About 20% pointed to “limited growth opportunities” and “limited resources for professional development” as challenges. Only 8% said the “perception that impact investing is not serious investing” was an obstacle.
“Other challenges respondents cited included limited awareness of the impact investing field, limited track record of the field (and therefore a small pool of qualified professionals), misalignment with respect to mission and culture fit, and difficult operating environments, specifially in emerging markets," the report said.
This human resources issue was identified in The Global Family Office Report 2018, by Campden Wealth with UBS. While sustainable and impact investing continued to be attractive for family offices, and were among the fastest growing areas in the average family office investment portfolio, uncertainty persisted, with fewer expert advisers compared to traditional classes.
The 261 respondents for the GIIN’s ninth edition of its Annual Impact Investor Survey invested $35 billion into 13,358 impact investments during 2018. More than one-third of the capital and nearly 70% of transactions were invested through private debt.
Those same respondents planned to invest $37 billion into 15,216 impact investments in 2019, expressing growth expectations over 2018 of 13% in volume of capital invested and 14% in number of investments. The typical respondent expected to invest $20 million in 2019, an increase of 33% from an average of $15 million in 2018.
Sapna Shah (pictured), managing director at the GIIN, said the survey showed the industry was becoming increasingly sophisticated.
“We are starting to overcome challenges that used to stop conversations before they started, such as the misperception that financial trade-offs are necessary across all impact investment strategies,” Shah said.
“Fully one-third of survey respondents are motivated to make impact investments because of—not in spite of—their financial return potential. This shows investors increasingly see alignment between business objectives and transformative impact.”
The GIIN survey released this week followed the launch of the Impact Investing Institute in April. The institute offered education online, livestreaming, in person, fellowships and custom courses as part of the multi-university non-profit Impact Finance Center.