How are investors reacting to this crisis?
Are investors continuing to invest in impact ventures, freezing their activities, or shifting towards specific sectors? And, how will the impact investing market change as a result of the crisis? What are the repercussions already felt by social enterprises currently raising capital? And, most importantly, how will the beneficiaries – those who ultimately benefit from the impact created by these incredible ventures – be affected?
Early on in March, our team at FASE started to look for answers to some of these questions. We saw an opportunity to pick the brains of impact investors in our network, to ask them for their views, worries and ideas and investigate the concrete measures that they already took or are planning to take in the coming months.
We launched the investors’ barometer on March 31st, 2020 and collected 34 anonymous responses by April 9th. The sample included a balanced group of 17 institutional and 17 individual investors. Over 60% of them are based in the DACH region, with the remaining covering the rest of Europe. The results were both intriguing and expected.
The majority of investors – almost 80% of our sample – are maintaining their investment levels, sometimes even increasing them for specific sectors such as healthcare. Interestingly, when asked about their expectations of the overall impact investing market, a significant proportion of investors is quite pessimistic: 49% expects a decrease in impact investments across all sectors within this year.
Only a few sectors are considered particularly promising over the next period: health & wellbeing, food & agriculture, education & employment. In addition, enabling services & technologies are preferred by institutional investors. On the contrary, investments in fields such as society & democracy, inclusion & equality and energy & environment are expected to drop.
When asked about their worries, investors mentioned the overall effects of the recession and the implications of this crisis on their portfolio companies. In particular they fear higher default rates due to external factors which might not spare even the best teams and business models. Probably this is why about 65% of them reported to provide emergency support to the ventures affected by the crisis. Some mentioned increased funding to increase liquidity, operational and strategic support and mentoring and even additional manpower.
To fare better during the crisis, investors advise social entrepreneurs to focus on rationalising, to engage in conversations with their current investors and to design new strategies to add value to the emerging needs during the crisis.
By sharing this report with the impact investing community, we hope that it contributes to impactful investment decisions for the foreseeable future and serves as a reminder that now, more than ever before, the world needs innovative solutions for positive impact!
For more information, check out the Impact Investing Barometer – Investing in times of global pandemic.