ESG Focus: Impact Investing Emerges From The Shadows

ESG Focus | Apr 04 2019

Two new reports aim to pull impact investing into mainstream finance acceptance.

-Landmark report sets benchmark for industry size
-Second report spells out four tenets of credible impact investing, to assist investors
-Next four years seen as critical for what still is fringe segment of ESG investing

By Sarah Mills

Impact investing in global markets has just breached the $500bn mark, according to a landmark report published in early April by the Global Impact Investing Network (GIIN), double previous estimates.

Impact investing, also known as core investing, is a relatively small but fast growing segment of the ESG market – for which 2018 figures ranged from $12trn in 2018, according the Forum for Sustainable and Responsible Investment, and $76trn, according to the Boston Consulting Group, depending on the criteria used.

Unlike ESG integration investing, which focuses on investing in the best-in-class companies, impact investing cuts to the chase and invests only in projects that will yield a benefit to the environment or society.

It usually pioneers ways to use resources or improve equality in areas such as water, energy, materials, food and health, and is closely linked to the UN Sustainable Development Goals.

To date, no clear estimates have been provided on the primarily private market’s size due to a lack of data and the speed of the industry’s development.

To remedy this, the GIIN Sizing the Impact Investing Market report has collated the assets under management of more than 1,340 impact investors, including asset managers, foundations, banks, development finance institutions, family offices, pension funds, insurance companies and others.

The report shows that more than 50% of impact investing assets worldwide held by about 860 asset managers in venture capital, private equity, fixed income, real estates and public stocks.

The report also reveals 31 economic development financial institutions hold 27%; foundations hold 2%; and family holdings less than 1%. Wealthy high-net individuals were not included in the study.

Assets reported included green bonds and stocks.

More than half of all assets are managed within the United States and Canada, and about 21% in Europe.

GIIN CEO and co-founder Amit Bouri says the survey provides an important baseline for not only assessing the current state of the market but for developing more sophisticated benchmarks.

“It will also lead to deeper conversations about the market’s future potential,” says Bouri, who told Reuters the figures reflect shifting sentiment about the role of capital in society.

Bouri says the initiative is important to ensure the market continues to scale with integrity, particularly in light of high-profile scandals such as the US college admissions scandal.

Organisations such as the World Bank and the Organisation for Economic Co-operation have expressed concerns about the lack of industry standards and the growing trend of “impact washing” and “green washing”.

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