J.P. Morgan/GIIN report on impact investment

Measuring the growth of a four year old treeIn December, investment bank J.P. Morgan released a report with the Global Impact Investing Network (GIIN) detailing interviews with 52 impact or potential impact investors. Impact investing represents roughly $4 billion in market potential in 2012, and is expected to capture potentially 5-10% of all investment in a decade.

The survey aims to uncover impact investor motivations and provide a more transparent view of the overall industry by analyzing investor responses to questions ranging from return expectations to investment motivations to topical investment focus. So what do investors think of the impact investing space? Here are some of the more interesting takeaways, from our perspective.

Cautious Optimism

According to the report, investors are cautiously optimistic about impact investing, but want to see more of an established track record in the space. As a member of our Advisory Board observed: “Everyone wants to be first to be second.” Which is to say that the overwhelming majority of the potential impact capital has yet to engage due to investors’ desire for a track record initiated by others. Once the first seed money takes the risk and helps a social venture succeed, other investors will likely rush to invest as well. We’re actively working to strengthen that track record by connecting investors with our forest investment opportunities and establish a more sustainable development model for our Panamanian partners.

Growing emphasis on measuring impacts

The report also highlights investors’ increasingly proactive stance toward measuring the impact of the organizations in which they have invested. They are using often independent sources such as GIIRS to measure the true social and environmental good these organizations claim to produce. Before our 2008 round of planting, we undertook a preliminary baseline study of our partner communities’ economic situation. Using this baseline study, as well as field and community observations, we expect to be able to quantify the social and environmental benefits we’re producing through our forest investments.

A balanced approach

One of the more interesting findings was the tendency towards balancing investment returns and social/environmental benefits generated. 60% of the investors surveyed responded that it wasn’t necessary to trade impacts for financial returns (or vice-versa). This is encouraging to us because we design our investments to balance financial returns and social and environmental benefits.

Through their responses, investors suggest strong growth for the impact investment market next year. Through our forest investments and Equitable Forestry model, we look forward to strengthening the case for impact investing as an integral part of investors’ asset mix.