Global impact investing market exceeds $1tn – GIIN report
"Psychological milestone" essential to raise credibility of the industry, but GIIN CEO Amit Bouri warns against complacency as "negative forces" could impede growth of the market – we report from the GIIN Investor Forum in the Hague.
The global impact investing market has topped US$1tn for the first time, according to the latest estimate by the Global Impact Investing Network (GIIN).
The GIIN’s CEO, Amit Bouri, revealed the figure this morning at the GIIN Investor Forum in the Hague, which numbers more than 1,500 delegates this year.
The GIIN’s 2022: Sizing the Impact Investing Market report, published today with support from asset manager Nuveen, shows 3,349 organisations currently manage US$1.164tn in impact investing assets.
Bouri (pictured) said the figure was a “significant psychological milestone for an industry still maturing and growing in sophistication.”
He added: “Impact investing right now is not nearly as big as it should be. But at the same time, it is certainly big enough to be worth paying attention to, and to have the credibility to engage the types of investors that we need to be making impact investments.”
But Bouri warned against complacency, pointing out that “negative forces” could hold impact investing back.
“Even in this time, when so much is working in favour of progress, there are forces aligned against us. Naysayers, who try to divide us and create fear through misinformation; people want to co-opt the movement in service of their own private goals; and others who cherish business as usual, using the impact label as cover to keep us in the past, instead of propelling us toward a better future.”
In the face of such challenges, he urged the delegates to “use the power of this community to maintain target momentum, to drive progress towards systemic transformation and to make sure that we reach our goals.”
Even in this time, when so much is working in favour of progress, there are forces aligned against us
The GIIN defines impact investing as investments that match the the Core Characteristics of Impact Investing: a clearly stated impact intention, an impact measurement and management process, and the achievement of measurable positive impact.
The research is based on GIIN’s own data, as well as data provided by third-party investor networks and data providers (National Community Investment Fund, Phenix Capital Group and Pitchbook). In addition, the researchers produced an estimate for impact investors for whom no data was available, and an estimate of how much of the impact investing “universe” is not being captured.
Cynicism
Fran Seegull (pictured), president of the US Impact Investing Alliance, told Pioneers Post: “It has been a very tough two years, so the fact that [impact investing] has grown in such a major way during a time of crisis is impressive."
She added: “Global AUM is somewhere between US$70 and US$80 trillion – so impact investing is still a relatively small portion. We are supposed to achieve [the UN Sustainable Development Goals] by 2030, which is right around the corner. So we should celebrate the trillion dollars but there are more billions and trillions to move to achieve the SDGs.”
Speaking to journalists after the event, Bouri said his main concern was that current controversies around ESG and sustainable funds, some of which are accused of greenwashing – mostly because people were expecting more from those funds than what they were actually delivering, and some occasional issues with integrity – could “breed cynicism.”
“Then people lose confidence that investments can be used to achieve real-world outcomes for people,” he added.
“What we want is to make sure that we're translating all those good intentions into real impact results… that's where we build the trust and confidence”
The GIIN was trying to mobilise capital towards impact, Bouri said, but it was committed to doing so with integrity – the key to avoid green- or impact-washing. He warned, in particular, of the dangers of big headline figures saying that tens of trillions of dollars were being invested in sustainability, because people on the ground didn’t see the impact of these investments materialise. “That starts to feel like platitudes and promises,” said Bouri.
He added: “[At the GIIN] we do try to make sure that our numbers are real… putting forward numbers that we think are reliable and are backed by efficacy. We'd rather be smaller but be able to be clear.”
What we want is to make sure that we're translating all those good intentions into real impact results
It was yet possible that the current backlash against ESG could drive more investors towards impact investing because it explicitly targets positive social outcomes, Bouri added, specifying that there was space for both types of investments anyway.
Who are the investors
Impact investors have US$485m in impact assets under management on average, according to the report. Fund managers represent the majority of impact investors (63%) and manage 63% of total impact investing assets.
Development finance institutions, making up just 5% of impact investors, account for 27% of impact assets under management. Other impact investors include foundations (non-corporate; 11% of the sample) and family offices (4%) among others.
This is the third impact investing market sizing research published by the GIIN in its nearly 15 years of existence.
In April 2019, the GIIN estimated that global impact investments had reached US$502bn at the end of 2018, before revising the figure up to US$715bn a year later, reflecting improved methodology and a bigger database.
Bouri warned that a change in methodology made it difficult to compare the latest figures like-for-like with estimates from previous years.
Other organisations, such as the International Finance Corporation (IFC), have produced impact investing market sizing reports. The IFC found that US$2.3tn were being invested for impact in 2020, albeit with a broader definition of impact investing than the GIIN.
Regional initiatives have measured the impact market at country level, including the UK (where impact investments reached £58bn last year), Spain (€2.4bn in 2021) and Japan (US$10.17bn in 2021).
Growth potential: corporate impact investing
The research identifies two areas with a high growth potential for impact investing: green bonds and corporate impact investing.
Green bonds – debt instruments issued to finance environmental ventures – have been in use for nearly 15 years, but the GIIN only includes in its research those green bonds that meet the intentionality and measurement criteria of impact investing.
Bouri said corporate impact investing was “still quite small” but presented a high potential – “We're at the early stages of what we see as a huge opportunity” Bouri said.
Last month, the GIIN launched the Corporate Impact Investing Initiative, to drive more companies towards impact investing with an aim to “ re-defining ‘business as usual’ when it comes to corporate investing and asset management”.
Top picture: Amit Bouri addresses the GIIN Investor Forum 2022 in the Hague. Photo: Pioneers Post.
Thanks for reading our stories. As an entrepreneur or investor yourself, you'll know that producing quality work doesn't come free. We rely on our subscribers to sustain our journalism – so if you think it's worth having an independent, specialist media platform that covers social enterprise stories, please consider subscribing. You'll also be buying social: Pioneers Post is a social enterprise itself, reinvesting all our profits into helping you do good business, better.
