With concerns about climate change, human rightsand social justice dominating popular culture today, impact investing is experiencing a boom. The sector’s phenomenal growth is being driven by investors who are not only seeking a healthy financial return, but also aiming to meet social or environmental goals. These twin desires are creating new opportunities and challenges for the “do good” financial-services sector.
According to the most recent annual survey from the Global Impact Investing Network (GIIN), investors allocated more than $33bn towards more than 13,000 impact investments in 2018. The GIIN’s research shows they plan to continue – and more than 15,000 deals are expected this year. The GIIN’s 2019 survey also reaffirms the breadth of this niche financial sector. At the end of 2018, the overall size of the global impact investing market stood at $502bn.
The network admits that estimates about the sector’s size vary wildly, and that there are no hard and fast numbers.”An accurate estimate of market size is in high demand,” Amit Bouri, cofounder and CEO of GIIN, wrote in the organisation’s Sizing the Impact Investing Market report. “Not only does it act as a central point of reference, but it enables comparison across various dimensions.”
While experts agree the number of investment funds is growing, actual estimates are not always easy to come by. In 2018, GIIN claimed there were more than 1,300 organisations holding impact funds. The same year, the Forum for Sustainable and Responsible Investment claimed 496 institutional investors, 365 money managers and 1,145 community investing financial institutions held impact investments, which it refers to as environmental, social and governance (ESG) assets under management.
Further complicating matters, not all of these funds are equal. “This is an emerging challenge,” Jane Ambachtsheer, Global Head of Sustainability with BNP Paribas Asset Management, told Al Jazeera. “To date, there is no harmonised framework for measuring or reporting impact investment outcomes.”
Any organisation, company or fund can lay claim to the “impact” label. Some have been accused of “greenwashing” – misleading investors about the environmental benefits of their products and services. Add to that a massive generational wealth transfer – where young investors gain control of family wealth or are part of the newly “tech” rich – and it becomes clear why demand is soaring for vetting and rating the funds, firms and nascent companies that claim to be part of the impact club. “The increasing demand for impact investing products and services has opened a new commercial avenue for asset managers, fund managers and service providers interested in this growing market,” Fiona Reynolds, CEO of the organisation Principles for Responsible Investment (PRI), told Al Jazeera.