The Global Impact Investor Network (GIIN) announced that the global impact investing market has now grown to $1.164 trillion.
- Impact investment has broken through the $1 trillion boundary for the first time.
- Impact is an increasingly important part of imvestment decisions but new tools and measurement approaches are needed, and the GIIN is launching an Impact Lab.
- While the GIIN remains relatively small, combining principles, benchmarks, standardisation and market design tool development should drive impact at scale.
This marks the first time that the organization’s widely-cited estimate has topped the $1 trillion mark. The new AUM figure, which is the central finding of the GIIN’s just released 2022: Sizing the Impact Investing Market Report, reflects an increasingly comprehensive measurement of impact investments globally and ongoing growth in the market
It also shows that there are now over 3,349 organisations manging the industry’s $1.164 trillion in impact investing assets, with an average AUM per organisation of $485 million. The median impact assets under management is lower at $62.5 million based on a sample of around 1200 organisations.
The report, which was produced with the financial support of US asset manager Nuveen, also spotlights two major areas of development relevant to impact investing: green bonds and corporate impact investing practices.
Since their inception in 2008, green bonds — a typical bond instrument where the proceeds are specifically used to finance or re-finance projects that are labelled as green — have become increasingly widespread among public and private institutions alike.
Meanwhile, shareholder pressure in recent years to invest cash reserves productively, coupled with stakeholder demands for corporations to help address major global challenges, has led to the rise of corporate impact investing.
GIIN Co-Founder and CEO Amit Bouri described the new market size estimate as a sign of the impact investing industry’s “undeniable momentum”. The comprehensive estimate of market size is a foundational data point for the still-growing industry – allowing industry players to compare impact investing to related sustainability-focused investment approaches, track the volume of capital flows into impact investing, and evaluate the changing nature of the market itself.
While the growth and size of the market is encouraging, it is also a call for further action. Bouri said: “Investing more capital with an intentional focus to generate positive impact is required right now if we truly want to meet the UN Sustainable Development Goals by 2030 and achieve net zero emissions by 2050.”
In response to the continuing growth of interest in impact investing, the GIIN has clearly committed to improving the tools and methodologies used to embed impact, track performance and standardise the approach to impact.
GIIN to partner on developing market solutions
The GIIN and three strategic partners are launching an Impact Lab, an impact performance R&D accelerator working to develop tools that will allow investors to more efficiently allocate capital towards effective social and environmental solutions.
The Impact Lab will conduct research and development to create analytic tools for optimising the positive impact of financial investments on people and the planet. The insights produced by such tools are essential to ensuring that investment capital is directed to the most effective impact solutions.
The initiative’s three founding strategic partners – EQT Foundation, Temasek and Visa Foundation – have ensured the launch of the Impact Lab with initial cumulative funding of $4.5 million. The Impact Lab will operate as a cross-sector consortium, working alongside these partner organisations to field test new innovative tools, like impact performance benchmarks.
“Determining impact performance is an important step for the financial industry to allocate capital to where it will matter the most. Developing impact intelligence tools and benchmarks with wide participation is critical for investors and asset managers to level up from impact outcome reporting to understanding if the impact outcome achieved was reasonable given the amount of capital being deployed,” said Cilia Indahl, Head of EQT Foundation. “We see this as a key initiative to support to strengthen the impact investing community.
The impact market is maturing
Another sign of growth in the impact market is the move by the Secretariat for the IFC run Principles for Impact Investment to the GIIN.
The Impact Principles are the impact investing industry’s framework for the design and implementation of impact management systems for investors, ensuring that impact considerations are integrated throughout the full lifecycle of an investment.
What makes the GIIN a good home for the Impact Principles is the complementary nature of its framework. The GIIN operates the IRIS+ system, which is focused on the translation of impact intention to the development of specific impact metrics for measurement and is itself linked to over 50 other mainstream and niche standards and frameworks.
Moving beyond metrics it also provides benchmarks to enable investors to measure their performance against their peers, the GIIN has recently launched an initiative for the measurement of corporate impact investing.
Alignment of the process of impact management with impact metrics, benchmarking and other parts of the impact ecosystem suggest a rapid maturing of the impact investment market.
Chief executive of the GIIN Amit Bouri said: “It’s a strong signal about how the market is beginning to mature. As we bring the Secretariat under the GIIN it enables the Principles to work with other parts of the impact infrastructure. The market has a lot of interest in impact, and a desire for integrity – that is what the impact principles represent.”