Impact investment demand outstripping supply – research

The survey, based on qualitative and quantitative polling of 91 participants (including 47 LPs), shows that both sides of the private equity partnership are bullish on impact investing: 87% of LPs and 91% of GPs surveyed expect to increase allocations and deployment into the space.

This is largely driven by demand, with LPs themselves under pressure from their own clients to increase allocation: 72% of the LP respondents cited client appetite as the main driver for impact investment allocation. In turn, GPs are also following the lead from their investors, with 49% of managers stating their increased focus on the strategy was due to LP pressure.

But LPs are still faced with a scarcity of high-quality offerings, with 28% of LP respondents citing poor track record as a risk to investing, and 90% putting "impact authenticity" as an important factor in allocating. According to Rede's qualitative survey, LPs are particularly wary of "green-washing" and GPs using impact to raise more funds without a coherent strategy to achieve strong financial performance.

The latter is increasingly important, with the survey showing how the perception of impact investing as an almost charity-like endeavour has shifted: 98% of LPs and 100% of GPs surveyed expect market-rate (or better) financial returns from impact investment.

The full survey can be accessed here.

The findings echo a recent Unquote Private Equity Podcast episode in which the team discussed the latest developments in the impact investment space, including an exclusive interview with Bridges Fund Management's Michele Giddens, and a look at reporting standards convergence.

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