JP Morgan Impact Investing report

JP Morgan's impact investment research team released its second report on the nascent industry.

http://www.thegiin.org/cgi-bin/iowa/resources/research/334.html

Biggest investment are in housing.

See spreadsheet below. If Table 8 in the report is reformatted and sorted by average investment type, we see that the largest investments are made in housing, the second largest in education.  Average housing investment is $5 million, and the average education investment is $0.7 million.  The average overall impact investment is around $2 million.


https://docs.google.com/spreadsheet/pub?hl=en_US&hl=en_US&key=0AoRYN7f_7ejDdEtUNTJhQnEzZno4UVlUUE13TkxBS1E&output=html

Interesting insights about government efforts to spur impact investment (pp. 7-8 of the report):

The United Kingdom (“UK”) government has established Big Society Capital, an impact investor with potentially GBP 600mm (USD 960mm) in capital to serve as a cornerstone investor leveraging further private capital. It will also support the development of new products for the impact investment sector, including “social impact bonds”, in which investors receive dividends linked to successful social results

In the United States (“US”), the Overseas Private Investment Corporation committed USD 285mm to catalyze USD 875mm of investment into six impact investment funds in emerging markets, an example of growing support for impact investments by development finance institutions. The US Small Business Administration also launched an Impact Investment Initiative, pledging USD 1bn over five years to support domestic businesses operating in underserved communities. The initiative matches capital raised by private investment funds through a public-private partnership.

The Australian Government’s Social Enterprise Development and Investment Funds initiative established the country’s first investment funds for domestic social enterprise late-stage seed and growth capital. The funds have been seeded with government first loss capital, include matching capital from private sector funders, and will provide flexible, tailored financial products and support to social enterprises.

"The data exhibits a lower return expectation for developed market impact investments than for traditional investments in the same region."
"For emerging markets, by contrast, the impact investment return expectations are more in line if not higher than the benchmarks’ realized returns"

What do impact investors expect from their investments?
"We find that 84% of investments into non-profit companies or funds were made with concessionary return

expectations (relative to similar non-impact investments). Similarly, 93% of investments made with competitive return expectations went into for-profit companies or funds."


What return do impact investors expect?
Return on debt investments into nonprofits was 3-4%.
Return on debt investments into for-profits was 7-8%.
The corporate form of the investee shaped investors' perceptions more than did the investors' goals for the investment (i.e., concessionary versus competitive expectations).

Returns on impact investments into for-profits do not exceed expectations.
Investors expected returns on the range of 2-7% into developing markets and 8% for emerging markets.  They realized returns of 3-8% in developing markets and 2-6% in emerging markets.  (Tables 10, 11)  And this result is likely to be more stark in reality because reporting bias probably inflates reports of realized returns and suppresses reports of returns that fell short of expectations.