Impact Investing Market Grows to Nearly $1.2 Trillion

The size of the worldwide impact investing market has grown to $1.164 trillion in 2021 from $715 billion in 2020, surpassing the trillion-dollar threshold for the first time, according to the Global Impact Investing Network.

“Our new estimate of a global impact investing market larger than one trillion dollars represents a significant psychological milestone for the industry, as it matures and grows in sophistication,” GIIN Chief Executive Officer Amit Bouri said in a statement. “While this figure serves as a very positive sign for the industry, it is also a call for further action. Vast allocations of capital and an intentional focus towards generating positive impact are required right now if we are to achieve the UN Sustainable Development Goals by 2030 and to reach net zero emissions by 2050.” [Source]

The report, which was financially backed by asset manager Nuveen, screened and analyzed data from more than 3,000 public and private market asset owners and managers. Only investors who met the criteria set by GIIN’s definition of impact investing were included in the final dataset. Fund managers accounted for 63% of the organizations in the sample and represented 61% of impact assets under management. And development finance institutions represented only 5% of organizations in the sample; however, they accounted for 27% of impact AuM, second only to fund managers.

“This speaks to the disproportionately large average size of DFIs, as well as the important role they continue to play in the market as providers of significant sums of capital for impact,” said the report, “especially in economic development among emerging markets.”

The report also highlights green bonds and corporate impact investing as two areas that are becoming increasingly prevalent in impact investing. It said that since coming to the market in 2008, green bonds – in which the proceeds finance or re-finance projects that are labeled as green – have become increasingly widespread among public and private institutions. It said that issuance of green bonds has grown at an annual rate of 43% to climb to $578 billion in 2021.

GINN said the popularity of green bonds has led to the development of other sustainable fixed-income instruments, such as blue, transition, sustainable, and social bonds. However, it also noted that the uptake of the products has been slower, and that early indications in 2022 suggest that the green bond growth trajectory has softened due to a broader bond market decline as a result of the war in Ukraine and monetary policy tightening. The report said that although the issuance of sustainability focused bonds totaled more than $1 trillion in 2021, it only represented approximately 4% of total worldwide bond issuance during the year.

Regarding corporate impact investing, the report said corporations mainly use balance sheet vehicles to deploy cash reserves as impact investments. However, it also said that off-balance sheet options such as corporate foundations and fund of funds are becoming increasingly popular. The report also found that the 50 largest public corporations in the U.S. pledged $45.2 billion in loans and investments toward causes that support the Black Lives Matter movement.

“The progress achieved over the past 12 years is laudable, but the impact investing industry cannot afford to become complacent,” said the report. “The 2030 target to achieve the SDGs is rapidly approaching, and capital allocation towards these goals remains woefully insufficient if the world hopes to avert the worst outcomes of climate change and continuing inequity.”