Impact investors are larger and still skeptical about AI, says GIIN

The world of impact investing is maturing and growing as investors grapple with the impact of AI on their work. These are some of the findings from the latest annual impact investor survey conducted by the Global Impact Investing Network (GIIN), a research and advocacy organization.

The sample included 305 impact investing organizations; each has over $10 million in assets under management or five investments since launch.

Large investors

According to the study, about 92% of assets came from large investors, with more than $500 million allocated to investment strategies. “They clearly play a role in driving this growth,” says Dean Hand, chief scientist at GIIN. They are increasingly investing in more mature, growth-stage companies, which suggests increased activity from institutional investors, Hand said. Overall, impact assets grew at a compound annual growth rate of 14%, up slightly from a year earlier.

Due to this trend, investors are using more complex asset classes for their investments. Government debt, real assets and public capital have all grown over the past five years, at compound annual growth rates of 32%, 27% and 19% respectively, although private capital remains the most heavily used.

Respondents also cited customer demand as an important area of ​​progress over the past five years. (They reported significantly less progress on clear regulatory guidance on impact investing requirements and existing suitable options).

AI: I still doubt it

For now, investors seem reluctant to join the artificial intelligence frenzy sweeping the business world. About 38% said they needed to learn more about the technology before implementing it. More than a third said they want to see a sufficient track record before using it.

At the same time, the responses showed that in a year the situation could change significantly. While only 3% said there are no barriers to integrating AI processes into their impact investing strategies, more than a quarter are expected to use AI in their strategies in the next year.

The potential of AI in measurement is particularly promising, Hand says. “AI can significantly improve system efficiency for investors, especially in the use of performance data collection,” she says. “There is huge potential for using AI to advance things like impact measurement and management.”

Climate action

The results present something of a puzzle regarding climate investment. Although the energy sector has attracted large investments in the past and continues to be a big area of ​​investor focus, it has been in decline over the past five years. That is, while there has been a slight decline in climate investment over the past five years, such investment has recently peaked, with the percentage of investors making at least one allocation to climate investment being 52%. “Whenever you come across a number that seems contradictory, it raises the question of what’s really going on,” Hand says. “It makes sense to me that as climate challenges become more apparent, investors will change their strategies to address those challenges.”

Other findings:

Investors reported that rising interest rates, inflation and climate change had the most significant impact on their exposure strategies in 2023.

Seventy-four percent of investors said they were targeting returns at market rates.

Most investors reported satisfaction with financial performance, and 90% reported satisfaction with results that exceeded or met expectations.