Impact Investing: How Big is the Market?

Impact Investing: How Big is the Market?

The Global Impact Investing Network recently issued a report on the size of the market for impact investing. The report explores how many investors want to invest how much of their money in ways that will do good for the planet and for the human social structures it hosts, as well as to do well by way of increasing the principal.

Authors worked from a database of more than 1,340 organizations around the world who manage assets with social or environmental impact. The amount of assets so invested exceeds $502 billion. Most organizations are relatively small, managing less than $29 million. But there are the behemoths of the field managing upwards of a billion each.

Amit Bouri, the CEO of GIIN, says optimistically that “around the world, people are shifting their attitudes about the role capital should play in our society—from building stronger communities to mitigating climate change globally.”

Why Numbers Do Matter

An estimate of today’s market size, plus an estimate of next year’s size, provides a sense of the rate of growth. Also, because a gross number helps one develop a sense of the impact that “impact” as a movement has. It also may help distinguish this very specific sort of investing from other sorts that sound misleadingly similar, notably ESG investment.

The report’s authors are Abhilash Mudaliar, GIIN Research Director, and Hannah Dithrich, GIIN Research Senior Associate. They write that they are working with a database that takes in a global group of investors, mostly through not exclusively from the developed parts of the world. A majority (58%) of those investors are in the US and Canada. Another large chunk (21%) are in western, northern, or southern Europe. The remaining 21% are scattered just about everywhere.

Methodology

How did GIIN come up with the headline $502 billion? Mudaliar and Dithrich address this question at some length. They began by making a list of impact investing organizations, drawing upon networks such as the Mission Investors Exchange and the Indian Impact Investors Council. The list grew to include more than 1,340 organizations—until it became big enough to be dignified with the term “database.”

Then the authors and their research team gathered AUM data from the names on that list. GIIN did not decide which investments to consider “impact” and which to exclude. It simply relied on self-reporting for that. They avoided counting any indirect investments so as to avoid double-counting.

The team estimated the AUM for those organizations from whom they could not get recorded numbers.

Finally, the team “estimated the proportion of the full universe captured.”

From this they derived not just that $502 billion but the fact that “one in four dollars in invested assets … now consider sustainability principles.” That amounts to $13 trillion.

They wrap it all up this way: “There is great potential for these investors, who have already aligned their capital with their values, to more intentionally use their investments to fuel progress through impact investments. The growing consideration of social and environmental factors in investing is also a signal of a larger shift in the global financial markets—an increasing number of people are recognizing that their money should do more than just make more money. Their investments can—and should—also seek to fuel meaningful, sustainable social and environmental impact.”

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