What Is the Local Investor Potential for Impact Investing?
In a few weeks, illustrious movie supervillain Gordon Gekko will make his somewhat less than triumphant return to Wall Street. He will likely return humbled, then reveal his true self (ie. Greed is good) before changing his ways or getting caught. It could go either way, but it’s predictable. At Social Venture Exchange (SVX) project, we are looking for the anti-Gordon Gekko’s of the world who have a new motto: invest for good.
We want to understand the local investor interest for impact investing. To this end, we are building a basic profile of institutional investors and asset owners/managers in Ontario and determining their level of current activity and potential interest in impact investing through detailed survey profiling via the Social Finance Census.
This survey work will allow us to understand the current and potential supply of capital that is available for impact investing, and therefore, the supply of capital that is available for local social and environmental ventures. Fortunately, we do know a few things about impact investing at a global and local level that provide a base for our profiling work.
We have a rough understanding of the long-term potential of impact investing at a global level. Given the size of today’s screened social investments, the Monitor Institute estimates that impact investing could grow to 1% of total managed assets, or a total market size of $500 billion. According to a recent report released by Hope Consulting, there is currently a $120 billion market opportunity for impact investing amongst high net worth individuals in the United States. The current figure is difficult to nail down. Blueprint Research and Design and GPS Capital Partners estimate that $4-5 billion of total assets are currently mission related investments (MRIs) and program related investments (PRIs), which forms a portion of the impact investing space.
It is much more difficult to determine the current and potential capital supply for impact investment locally (ie, in Ontario). We do know that it likely counts in the hundreds of millions. In Canada, it is estimated that the community investment marketplace is equal to $1.4 billion in total managed assets. This marketplace includes 487 organizations managing assets from $7,000 to $280 million. The vast majority of these funds (66 per cent) are Community Futures and First Nations Funds, which receive capital from various levels of government.
We know that Canadian foundations are engaged in impact investing. A recent Canadian study of nine major foundations discovered that there were $32 million in community / mission investing assets in their endowments, representing four (4) per cent of their total assets. These foundations reported a total of 50 current community/mission-related investments. We also know that there is significant activity in BC and Quebec. In 2004, social economy enterprises and collective housing projects in Quebec received $330 million in investments through Solidarity Finance institutions.
But this is just the tip of the iceberg. We do not have a full and detailed picture of the current and potential supply of impact investing capital in Ontario and across the country. We believe the profiling work of SVX will be vital to building that picture.
When coupled with our profiling work on the demand for capital amongst social and environmental ventures, we hope this data will help demonstrate interest within and beyond the investment community, encourage tailored financial product and marketplace development, and ultimately drive investment for ventures that produce positive social and environmental impact.
Once that’s done, the hard part will be coming up with a new script and title for Wall Street 3. Until then, we’ve got some other work to do.
Photo credit: http://www.flickr.com/photos/edublogger/3661747201/