Impact investing taking off in earnest with asset owners piling in

Net Zero Investor reported recently that the global impact investing market size will grow from $420.91 billion in 2022 to $495.82 billion this year.

This growth is expected to continue for years to come, with the market forecasted to reach $955.95 billion by 2027, according to data from The Business Research Company.

Impact investing is a fast-growing trend in asset owners' investment preferences and refers to a general strategy that helps investors spend their cash with the intention of generating positive, measurable social and environmental impact. 

This investment is also shown as a company's commitment to corporate social responsibility and is used to generate some beneficial financial returns.

The main types of impact investing markets and illustrative sectors are education, healthcare, housing, agriculture, environment, clean energy access, climate change, and others. 

Particularly the education market gets a lot of attention recently: it involves the provision of capital to educational institutes, related organisations and companies as well as student projects to provide educational opportunities. 

Impact investing offers expanding education opportunities for children and adults in developing countries by promoting investors to invest in public and private education institutes to provide good education and to fulfil the demand and supply gap in education. 

Ukraine war disruption

The Russia-Ukraine war disrupted the chances of global economic recovery from the Covid-19 pandemic, at least in the short term. 

The war between these two countries has led to economic sanctions on multiple countries, a surge in commodity prices, and supply chain disruptions, causing inflation across goods and services and affecting many markets across the globe. 

The impact investing market size is expected to grow to $955.95 billion in 2027 at a CAGR of 17.8%, according to The Business Research Company.

Partnerships and acquisitions

Strategic partnerships and collaborations have emerged as a key trend gaining popularity in the impact investing market. Major companies operating in the impact investing sector are focused on strategic partnerships to sustain their position in the market.

For instance, in November 2020, RepRisk, a Switzerland-based company operating in environmental, social, and corporate governance, partnered with Apex Group Ltd. to offer ESG (Environmental, Social, and Governance) risk data through real-time analysis for their customers' portfolios.

This tool provides data on private companies and allows unrivalled ESG insights into private companies and their investors. Also, this tool helps them offer data insights to their customers to make better investment decisions. Apex Group is a US-based company operating in capital investment.

Moreover, in December 2020, Root Capital, a US-based impact investment company, partnered with Keurig Dr. Pepper for an undisclosed amount.

With this partnership, both companies' focus is on helping smallholder farm businesses to withstand the Covid crisis. Also, it helps to recover medium-term businesses and re-imagine their strategies for growth and success in the long term. Keurig Dr. Pepper is a US-based producer and distributor of hot and cold beverages.

In January 2022, M&G, a UK-based company operating in impact investing, acquired Responsability investments, aq Switzerland-based company operating in the area of impact investing, for an undisclosed amount.

Through this acquisition, M&G plc aims to strengthen its international presence and private asset origination capabilities by increasing investments through sustainable investment capabilities in impact investing. 

Major players in the impact investing market are Triodos Bank N.V, Sarona Asset Management, Omidyar Network, LeapFrog Investments, Revolution Foods, Acumen, Intellecap Advisory Services Pvt. Ltd., Vestergaard Frandsen, Unitus Capital, WaterHealth International Inc., LAVCA, REDF, Vital Capital Fund, Reinvestment Fund, and Community Reinvestment Fund.

Next generation investors

The increase in millennial investors is expected to propel the growth of the impact investing market going forward. Millennial investors refer to a type of investor who is less likely to invest in stocks. 

These millennial investors are adopting sustainable investing to aim for positive change in addressing social and environmental issues and to generate wealth constantly. 

Millennial investors believe impact investing is the best way to increase their share of social change and good as compared to the traditional forms of philanthropy to create long-term positive change in society. 

For instance, in April 2022, according to a survey conducted by Fidelity Charitable, a US-based independent public charity with a donor-advised fund program, that included more than 1,200 investors to understand their approach to investing in social change, stated that approximately 61% of millennial investors participated in impact investing and 40% of non-participating investors are expected to make their impact investment in the future in the US. 

Therefore, increasing the number of millennial investors is driving the growth of the impact investing market.

Regional differences

North America was the largest region in the impact investing market in 2022. The regions covered in the impact investing market report are Asia-Pacific, Western Europe, Eastern Europe, North America, South America, the Middle East, and Africa.

The countries covered in the impact investing market report are Australia, Brazil, China, France, Germany, India, Indonesia, Japan, Russia, South Korea, UK, USA.