Impact investing has been a growing area. Money is put to work to achieve a specific result, such as cutting criminal reoffending and poverty, improving an environment and education. Crucially, the process is also designed to deliver some kind of monetary return.
The total size of assets managed to have a specific impact, such as curbing poverty, improving an environment or education, reached a record $228 billion in 2020, rising from $181 billion a year before, a directory that is used by family offices and other financial bodies has reported.
ImpactAssets has released ImpactAssets 50 2021 (IA 50), a free online database for impact investors, family offices, financial advisors and institutional investors. This is the 10th edition of the IA 50.
Some 13 managers selected in the latest study reported assets exceeding $1 billion. By comparison, in the IA 50’s inaugural year, assets totaled just $6.8 billion, ImpactAssets said.
Impact investing has been a growing area. Money is put to work to achieve a specific result, such as cutting criminal reoffending and poverty, improving the environment and education. Crucially, the process is also designed to deliver some kind of monetary return. It should not be conflated with philanthropy, and differs from the currently popular theme of environmental, social and governance-themed (ESG) investing.
The organization’s Emerging Impact Manager list, which debuted in 2020 and spotlights newer fund managers that demonstrate potential to create meaningful impact, also saw significant growth. The number of emerging fund managers across a variety of themes and geographies included in this year’s list grew to 41, up from 16 managers. Total AuM increased to $917 million, up from $397 million last year.
“When we launched the IA 50, we knew there was tremendous potential for impact investing, but realized many interested investors weren't aware of the incredible range of impact fund managers available to them. As the field has evolved, we have also become aware of the large number of innovative fund managers not identified via our traditional networks," Jed Emerson, ImpactAssets senior fellow and IA 50 Review Committee chair, said. “More recently we have expanded the lens of our process to capture more breadth and diversity of impact fund managers and in doing so have also chronicled the progress made by impact investors as well as the work that still needs to be done.”
Seven Community Development Financial Institutions (CDFIs) were selected in this year’s IA 50, reflecting the critical role CDFIs have played during the COVID-19 pandemic—from distributing PPP loans to supporting small businesses within rural, indigenous and low-income communities, and communities of color. These organizations represent both national and locally-focused community funders and manage a combined $18.7 billion in assets.
The directory added a new Emeritus category this year highlighting 27 managers with a combined AuM of $8.8 billion. These fund managers have been on the IA 50 for at least five years; 10 managers have been on the list for all 10 years of the IA 50's existence.
In 2020, the global pandemic and subsequent economic downturn affected communities worldwide, and IA 50 fund managers focused on some of those hardest hit. A total of 63 per cent of managers targeted investment in rural communities, while 54 per cent specifically benefited people of color and 48 per cent were focused on advancing women-led businesses. Two-thirds (67 per cent) of managers said that their firm focused on underdeveloped markets where the market is relatively new, emerging or subject to systemic challenges.
While fund management remains overwhelmingly non-diverse, IA 50 fund managers are leading with diversity. This is especially true of the IA 50 Emerging Impact Managers, where 51 per cent reported that more than half of their investment professionals were women and 54 per cent said more than half of their investment professionals were people of color.
A total of 87 per cent of IA 50 fund managers targeted market rate or above rates of return and 92 per cent delivered either in line or above their target returns.
The IA 50 is not an index or investible platform and does not constitute an offering or recommend specific products.