NEPC Survey: Endowments and Foundations Don’t Expect to Sacrifice Performance with Impact Investments
Wednesday, May 4, 2016
NEPC, LLC (www.nepc.com), one of the industry’s largest independent, institutional investment consulting firms, today published the results of its Q1 2016 NEPC Endowment and Foundation Poll. These results show that 86% of asset owners that currently use impact investing expect these allocations to equal or outperform the overall market.
“Institutional investors don’t have to sacrifice returns in order to have a principled investment strategy,” said Kristine Butler, a Senior Consultant in NEPC’s Endowments & Foundations practice. “It’s important the asset owner community understands that impact investing is based on more than merit alone. The assets, be they in equities or fixed income, must align with the strategic framework of a risk-adjusted portfolio. We’ve seen client interest in the space grow significantly in the past five years and we expect the same growth for the foreseeable future.”
In a sign that impact investing has become mainstream, a majority (52%) of respondents have already moved forward with impact investing or plan to consider it.
The majority (94%) of those who have implemented impact investing cite alignment with mission and/or values as a primary driver in their decision. This is likely why 50% implement impact investing on a portfolio-wide basis, not as a small allocation within the overall portfolio. Despite much hype around divestment, many endowments and foundations are instead proactively funding mission-related investments.
“We’re seeing that the move to impact investing is most frequently motivated by positive pull factors like strong returns and mission alignment, as opposed to push from an institution’s key constituents, such as a board of directors or student body,” Butler said. “This is why NEPC is committed to impact investing research: to guide clients in the direction that helps them achieve their goals.”
For those not using an impact strategy, 50% say they’re looking for more evidence of tangible results, and about a quarter (28%) are awaiting broader acceptance of impact investing or more mission-aligned investment options.
Concerns About Growth
The NEPC poll has run quarterly since Q3 2013, asking both tracking and topical questions and this latest quarter witnessed two record results. According to the latest survey, 82% of respondents say a slowdown in global growth is the biggest threat to near-term portfolio performance, the highest since NEPC has conducted the survey. Furthermore, 60% of respondents say the global economy is stagnant and in the same place as last year, another record.