Impact Investments: An Emerging Asset Class
November 29, 2010
Impact investments: An emerging asset class is a research note published by J.P. Morgan Global Research and is the result of collaboration between Social Finance at J.P. Morgan and The Rockefeller Foundation, in partnership with the Global Impact Investment Network. The report’s authors suggest that impact investing will establish itself as an important investment movement over the coming years.
This research note asserts that impact investment, which is intended to create positive social or environmental impact beyond financial return, constitutes a new asset class. Impact investments are typically made in private markets by providing debt or equity to mission-driven businesses. Impact investing has gained traction among a wide range of investors, including large-scale financial institutions, pension funds, family offices, private wealth managers, foundations, individuals, commercial banks, and development finance institutions.
The report also includes the first large-scale data analysis of return expectations from more than 1,000 impact investments and compares them to established benchmarks for emerging and developed market debt and equity returns. The analysis shows that investors have broad expectations for impact investment financial returns, ranging from concessionary to market-beating.
The report also estimates significant market opportunity for impact investment over the next ten years. After analyzing selected segments of five sectors—urban affordable housing, rural access to clean water, maternal health, primary education, and microfinance—serving the population at the “base of the economic pyramid,” the authors identify a potential profit opportunity between $183 and $667 billion and a potential investment opportunity between $400 billion and $1 trillion in the next decade for just these segments of the impact investing market.
We hope this report helps to advance a broader understanding of impact investing as an appropriate and economically effective way to complement government and philanthropy in solving the world’s greatest problems at scale.