Impact Investing in Times of Global Pandemic

A year into the pandemic and we are still struggling to see its end. How have impact investors reacted to the effects of COVID-19 on their strategies and portfolios? What are some lessons learnt and how is the pandemic transforming the practice of impact investing for the future? Keep on reading to discover some of the insights collected from 50 European impact investors.

Picture: FASE

The Full report is available here

In March 2020, when we launched FASE’s first Impact Investing Barometer – Investing in Times of Global Pandemic, we thought it would be a one-time exercise. In spring 2021, lockdowns, social isolation and medical emergencies have just become the “new normal”. In this year’s barometer, we went back to our community of investors and inquired about both how 2020 fared and what changes they plan to make to their work practices and strategies for the future.

1. Impact investors remain committed, but will the capital follow?

42% of investors increased their investment levels demonstrating their strong impact commitment. Moreover, 29% maintained the same level of investment as planned before COVID-19.

On the other hand, when we look at the capital inflow into impact investing vehicles, the situation is different. Of the 19 investors who had planned to raise new external capital in 2020, only 8 concluded the fundraising round as planned. The remainder either had delays due to COVID-19, postponed fundraising or simply did not manage to raise any commitments in 2020.

2. Most impact ventures continue to achieve financial and impact goals

About half of the investors’ portfolios were not affected by COVID-19 and about 20% even observed an increase both in the impact and the financial performance of their portfolio, proving resilience when it’s most needed. Only a third of investors noted a weaker financial performance generated by their investees.

3. Strategic and finance-related support helped ventures most in coping with COVID-19

More than half of the investors surveyed pointed out that strategic support (coaching, pivoting, supply chains etc.) proved to be the most helpful tool for their companies. Other effective measures targeted the investees’ financial needs, be it as support with fundraising, adjusting financial targets, extending the maturity of the investments or deferring/reducing the interest payments.

4. Which companies fare better in crisis?

According to investors, certain characteristics enhanced the success of their investees. Therefore, if you’re a venture or an investor looking for new projects, keep in mind: most of our respondents found that the dream team to weather the storm includes multiple team members of different ages and/or more mature entrepreneurs and ensuring gender-balance might also help! Also, today’s successful business models require at least a partial digitalization and agility to pivot if needed.

5. Virtual work is here to stay

85% of the investors agreed that remote work enhanced their efficiency in 2020, leading to an intention to continue having more virtual meetings in the future. How this will affect investment decisions and management of the portfolios remains to be seen.

6. What other changes has COVID-19 caused?

More than a third of investors are keen to continue their non-financial support for their portfolio companies, as well as collaborate with other investors on due diligence. Some investors have a higher level of interest to look at digital impact ventures as a result of COVID-19. Further confirming last years’ commitments, 5 SDGs continue to raise increasing interest from investors, many of whom intend to either increase their allocations towards these SDGs or start investing in these.

7. Has COVID-19 had similar effects across all of Europe?

The report also features a special chapter on Central and Eastern Europe, given that COVID-19 led to a decrease in capital reaching the region. Indeed, probably as a result of this capital flight from the region, we observed that about half of the impact investors froze or decreased their investments in 2020. Moreover, 5 out of 8 CEE impact investors experienced delays or were not able to close their own fundraising for their investment vehicles. Check out the report for a zoom into the region!