UK impact investments reach £77bn at the end of 2023, Impact Investing Institute reveals

Laura Joffre 17th September 2024

Impact assets under management in the UK are up by a third compared with 2020 figures, according to latest report from Impact Investing Institute, while impact investing receives strong backing from government minister Lisa Nandy.

Impact investments managed in the UK reached £76.8bn at the end of 2023, a 33.3% increase on 2020 figures, according to a study published yesterday by the Impact Investing Institute.

The report, entitled The UK impact investing market – Size, scope and potential, was produced through a market survey and engagement with more than 100 stakeholders, estimates the amount of direct impact investments for which the majority of investment management activities occurs from the UK (the capital managed may be invested outside of the UK). It shows an increase of £19.2bn compared with the end of 2020, when the first iteration of the report estimated the size of the market at £57.6bn.

The Impact Investing Institute is an independent non-profit organisation established to support impact investing.

Kieron Boyle headshot Speaking at the report launch yesterday at Guildhall, home of the City of London Corporation, Kieron Boyle (pictured), CEO of the Impact Investing Institute, said: “The UK impact investing market’s trajectory is clear: it’s growing, it’s evolving, it’s innovating, and it’s embedding itself increasingly into the core of our financial system.”

The increase since the end of 2020, equivalent to 10% a year, considerably outperformed the wider UK asset management sector, which had an annual growth rate between -2% and 0% over the same period, according to the report. Impact investing accounts for just under 1% of the whole of the UK asset management market, the research finds.

The UK impact investing market’s trajectory is clear… it’s embedding itself increasingly into the core of our financial system

The report features a strong endorsement of impact investing by the new Labour government, with secretary of state for culture, media and sport Lisa Nandy (pictured) highlighting the willingness of the government to partner with private investors to create positive impact across the country. (The brief for civil society sits within the Department for Culture, Media and Sport.)

Lisa Nandy “The Labour Party has a long and proud history of forging partnerships between governments and investors, businesses, and charities, with the aim of doing well by doing good,” Nandy says.

“All the best examples of things that are built to last are when they have been built together. This is why impact investment matters. It has the power to harness the innovation and entrepreneurship that exists in all parts of our country, and direct it towards a common good. We can see the immense value of these kinds of partnerships.”

But the encouraging figures are bittersweet as a number of indicators – from rising inequality to dropping life expectancy, as Boyle reminded the audience yesterday – show much more is needed to tackle today’s problems.

Dame Elizabeth Corley, speaking in a pre-recorded video message broadcast at the launch, said: “It's great to see this progress, but we all know it’s simply not enough. We’re not channelling enough capital into the places, projects and people that need it most, and we need to see more real world outcomes arising from impact investing here at home, and across the world.”

Boyle said: “The question is no longer whether impact investing can make a difference, but how quickly and effectively we can harness its potential to create changes our world urgently needs.”

The figures show that the UK market represents 8.7% of the global impact investing market size – estimated at US$1.164tn (£880m) in 2022 according to research from the Global Impact Investing Network (GIIN). (The GIIN is due to publish an updated market sizing study later this year).

The role of government as ecosystem builder and partner

The report highlights the role of government to create the right ecosystem for the sector to thrive but also to act as a partner to create more impact.

In an introduction to the report, co-executive directors of the Impact Investing Institute Sarah Teacher and Bella Landymore said: “The growth of the impact investing market opens new avenues for collaboration between private capital and government.

“There is immense potential for partnerships that can mobilise resources at scale to address pressing social, environmental, and economic challenges. Through blended finance structures and a focus on measurable outcomes, these collaborations can unlock capital that transforms lives across the UK and beyond.”

The Labour government has pledged to work with investors in order to mobilise private capital to fill a gap in public finances, and some senior figures in the party have called for a “strategic partnership” with impact investors to drive more capital where it’s needed, while leaders in the impact economy have urged the government to support the sector.

The UK’s impact investing market in 2023: key findings

Impact assets under management stand at £76.8bn.
The UK market represents 8.7% of the global impact investing market size.
Impact investors are most likely to invest in financial services (including microfinance and community finance for example); healthcare; social and affordable housing; clean energy; and information and communications technology.
88% of respondents say their impact performance is in line with or outperforming targets.
There was a lower performance in matching financial targets, with the share of respondents saying their investments were in line or outperformed their financial targets dropping to 68%, compared with 90% in 2020. The report suggests this could be due to rising government interest rates.
Two-thirds of respondents plan to increase or sustain their allocation of capital towards impact (down from 75% in 2020).
The most common types of impact investors in the UK are investment managers (including asset managers and social investors) which hold £60.7bn in impact asset under management; followed by development finance institutions with £7.2bn, and institutional asset owners like pension funds, foundations, endowments and insurance companies, with £3.42bn.
Private equity, real assets and private debt account for 85% of total impact investments, but respondents highlight an increased availability of strategies listed on public markets.

The research follows the GIIN’s widely adopted definition of impact investments as: “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return”.

The research was produced by the Impact Investing Institute in partnership with Social Finance, with help from the GIIN on data collection, and received funding from the Department for Culture, Media and Sport.

Better Society Capital, the UK’s wholesale social investor, publishes an annual market sizing of social impact investing in the country – estimated at £9.4bn in 2022 – but this does not include investments primarily targeting environmental outcomes, global investing from the UK or impact investing into businesses that don’t explicitly define themselves as impact-driven, hence the much lower figure.

Top image: view of the City of London via Freepik. Portrait of Lisa Nandy: UK Parliament.

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