The Environment and Climate Change are Key Areas of Focus as Most Mission-Related Investors (Often Called Impact Investors) Intend to Increase These Allocations
BOSTON (February 15, 2017) – Mission-related investing, which includes impact investing and environmental, social and governance (ESG) investing, is gaining significant momentum among non-profit institutional investors, according to a survey by global investment firm Cambridge Associates. The most common thematic focus among impact investors is the environment and climate change, with healthcare, housing, job creation, and education also cited as areas of interest by respondents in Mission-Related Investing: Current Practices and Views of Non-Profit Investors.
In a survey of 159 non-profit institutional investors around the globe, 31% say they’re currently engaged in mission-related investing – making investments designed to align with or advance institutional goals or values as well as provide financial returns. Of that group, 44% say they have increased their mission-related allocation over recent years, and 62% expect to grow their mission-related allocation in the coming five years. None of the institutions that currently make mission-related investments expect to decrease their allocations.
“This data confirms what we have observed among our clients over the past decade – that mission and impact investing has gained significant traction, and that many of our mission-focused clients view it as a core investment discipline with plans to deepen their commitment over time,” says Jessica Matthews, Managing Director at Cambridge Associates and head of the firm’s Mission-Related Investing Practice, which works with institutions to design and implement their mission related investing programs.
The respondents to the survey, fielded in 2016, include foundations, colleges and universities, religious institutions and pensions around the world, including in the United States, Italy, Japan, New Zealand, Switzerland and the UK.
Growth in Mission-Related Investing Driven Largely by Environmental and Climate Change Concerns
Overall, about three-quarters (74%) of nonprofit mission-related investors expect to increase investments to ESG and climate change-related investment strategies. Cambridge Associates found that more than three-quarters (76%) of colleges and universities that make mission-related investments either currently consider climate risk when making investment decisions (41%) or anticipate doing so in the future (35%). Among foundations, 30% already consider climate risks, and 30% anticipate doing so going forward.
Among MRI strategies, the largest portion of investors reported employing negative screens; however, the survey found that investors anticipate proactively seeking ESG and environment/climate change opportunities more so than negative screening going forward.
Challenges and Opportunities for Implementing Mission-Related Investing Strategies
Non-profit mission-related investors say the biggest challenge in implementing their strategies is a lack of adequate mission-related investment options, followed by their own resource constraints.
“The good news for mission-related investors is that we’re seeing a proliferation of ESG and impact investing strategies coming to market, so this product supply problem is becoming less of a barrier to entry over time,” says Matthews. “Across asset classes, we track over 1,000 MRI funds in our manager databases, and that number has steadily increased since we started tracking the data in 2008. That said, manager diligence and selection is increasingly important in this space just as it is within any other investment strategy.”
Matthews adds that an appropriate and well-constructed governance model – including setting a well-defined investment policy – can add to the success of an impact or mission-related investment program. “Institutions can lay the groundwork today that will help them arrive at better investing decisions in the future, regarding both risks and opportunities across the entire portfolio,” she says.
“Colleges, universities, foundations and family offices are increasingly paving the way in implementing thoughtful mission-related investing programs,” she adds. “Investors are truly starting to recognize that social and environmental goals can be effectively integrated alongside their investment objectives.”
For additional information and insights into the mission and origins of the Mission-Related Investing practice at Cambridge Associates, read an exclusive panelist Q&A featuring Jessica Matthews on The Economist’s Impact Investing blog. Matthews is participating in a discussion titled “Seeking Impact: The Measurement Challenge” at today’s The Economist’s Impact Investing Conference in New York.
- Mission-Related Investing: Current Practices and Views of Non-Profit Investors, Cambridge Associates (2016)
- The Foundation of Good Governance for Family Impact Investors: Removing Obstacles and Charting a Path to Action, Cambridge Associates (September 2016)
- Risks and Opportunities From the Changing Climate: Playbook for the Truly Long-Term Investor, Cambridge Associates (December 2015)
- Introducing the Impact Investing Benchmark, Cambridge Associates and the Global Impact Investing Network (June 2015)
About Cambridge Associates
Cambridge Associates is a global investment firm founded in 1973 that builds customized investment portfolios for institutional investors and private clients around the world. Working alongside its early clients, among them several leading universities, the firm pioneered the strategy of high equity orientation and broad diversification, which since the 1980s has been a primary driver of performance for these leading fiduciary investors. Cambridge Associates serves over 1,100 global investors – primarily foundations and endowments, pensions and family offices – and delivers a range of services, including outsourced investment (OCIO) solutions, traditional advisory services, and access to research and tools across global asset classes. Cambridge Associates has more than 1,300 employees – including over 150 research staff – serving its client base globally. The firm maintains offices in Arlington, VA; Boston; Dallas; Menlo Park and San Francisco, CA; London, UK; Singapore; Sydney; and Beijing. Cambridge Associates consists of five global investment consulting affiliates that are all under common ownership and control. For more information about Cambridge Associates, please visit www.cambridgeassociates.com.