Impact investment universe grows to $502bn
Written by Owen Walker
The global impact investment market is worth more than half a trillion dollars, according to the most comprehensive study to date of one of the fastest-growing areas of asset management, which will be published on Monday.
The new analysis puts the size of the market at $502bn, double the sum of previous attempts to quantify the value of assets dedicated to impact investing, which treats societal and environmental outcomes as equal to financial returns.
The Global Impact Investing Network, the industry body, gathered data from more than 1,300 impact investors worldwide, including asset managers, banks, development finance institutions, family offices, pension funds and insurers. Early studies of the industry have been less comprehensive.
Much of the recent growth in impact investing has come from a surge in interest from millennials — investors born between the mid 1980s and the early 2000s — as well as the establishment of UN Sustainable Development Goals, which have provided a framework for targets.
“The results of this study underscore the momentum of impact investing but also the need for continued growth across the responsible investing landscape if we are to address global challenges like those outlined in the Sustainable Development Goals,” said Amit Bouri, chief executive of GIIN. Several of the world’s biggest money managers have entered impact investing, including UBS Wealth Management and Goldman Sachs Asset Management. Non-profits such as the Ford Foundation and the Michael & Susan Dell Foundation have also made commitments.
But one private equity company that has embraced impact investing, TPG, was rocked last month when Bill McGlashan, one of its key executives and a leading figure in the market, was embroiled in the US college admissions scandal. Mr McGlashan has since left the group, which is partnered with U2 singer Bono on its popular Rise impact funds. The sector’s popularity has also given rise to concern that some fund managers are marketing themselves as impact investors but doing little to produce the non-financial outcomes that clients expect.
This has led several institutions to create frameworks to define impact investing, including the International Finance Corporation, the World Bank body that promotes investment in developing countries, and the UN-backed Principles of Responsible Investment. GIIN has also come up with its definition for impact investing, which it will publish this week.
“As the industry grows, we need to be sure it scales with integrity — ensuring good intentions translate into real impact results,” Mr Bouri said.
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