Understanding Impact Investing
Impact investing is a growing trend in the financial world that aims to generate positive, measurable social and environmental impact alongside a financial return. This form of investing is a direct response to increasing social and environmental challenges that traditional markets and governments are struggling to solve.
Recent Developments in Impact Investing
Increased Investor Interest
Recent news in the sector indicates a significant increase in investor interest in impact investing. According to the Global Impact Investing Network (GIIN), the market size for impact investing doubled from $114 billion in 2016 to $228 billion in 2017. This trend is expected to continue as more investors seek to align their financial goals with their personal values.
Introduction of New Funds
There has also been a surge in the introduction of new impact investing funds. For instance, BlackRock, the world’s largest asset manager, recently launched a new suite of impact investing funds aimed at generating measurable social and environmental outcomes alongside competitive financial returns.
Government Support
Governments worldwide are also increasingly supportive of impact investing. For example, the UK government recently launched a £30 million fund to support social impact investments. Similarly, the US government has introduced several initiatives to promote impact investing, including the Opportunity Zones program, which provides tax incentives for investments in low-income communities.
Impact of COVID-19 on Impact Investing
The COVID-19 pandemic has brought about a renewed focus on impact investing. As the pandemic ravages economies and exacerbates social and environmental challenges, more investors are turning to impact investing as a means of contributing to solutions.
Increased Focus on Health and Social Issues
In particular, there has been an increased focus on health and social issues in impact investing. Investors are increasingly interested in companies that are addressing the pandemic’s challenges, such as those involved in healthcare, affordable housing, and sustainable agriculture.
Resilience of Impact Investments
Interestingly, impact investments have proven to be resilient during the pandemic. According to a survey by the GIIN, the majority of impact investors reported that their investments were performing in line with or better than their expectations, despite the economic downturn.
Future of Impact Investing
The future of impact investing looks promising, with increasing investor interest, government support, and the introduction of new funds. However, the sector also faces challenges, such as the need for standardized impact measurement and reporting, and the risk of “impact washing,” where investments are labelled as impact investments without delivering meaningful social or environmental outcomes.
Despite these challenges, the potential of impact investing to contribute to solutions to pressing social and environmental challenges is increasingly recognized. As such, it is likely that impact investing will continue to grow and evolve in the coming years.
