Sometimes a crisis can help bring positive change. For impact investing, the COVID-19 pandemic and the inequities it exposed are boosting its outlook.

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Impact investments are made with the intention of generating positive and measurable social, economic and environmental outcomes as well as a financial return. Asset owners and managers put them under various asset and strategy buckets, including ESG or sustainable investing — and note that the one shorthand definition to differentiate ESG from impact is that ESG tends to be more about risk management, while impact investments are specifically intentional.

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Measuring comprehensive returns remains elusive. Among respondents in the Global Impact Investing Network’s 2020 annual investor survey, 67% said they pursue competitive, market-rate returns. They also reported that portfolio performance overwhelmingly meets or exceeds expectations for both social and environmental impact and financial return, with just 12% reporting underperformance. When asked about impact, 78% said it met expectations and 21% said it exceeded them.

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Still, as work progresses on standards and metrics, investors are leery of greenwashing. They “are more concerned that you actually deliver on what you promise,” said Nicholas Hegarty, senior vice president with global private markets investment manager Partners Group AG in New York. The firm has $109 billion under management, of which $4.2 billion is managed or advised under a dedicated impact fund methodology.

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