For the past decade, the Global Impact Investing Network (GIIN) has released its annual survey on the state of the impact investing world. The 2020 Annual Impact Investor Survey released in June shares data compiled from nearly 300 of the world’s leading impact investors. These investors collectively manage over $404 billion of impact investing assets, an important sub-group of the $715 billion global impact investing market.
The survey revealed four key findings in impact investing market trends:
- The impact investing industry remains diverse.
- Over time impact investing has grown in sophistication and depth.
- Impact investment management and measurement practices have matured, but opportunities for refinement remain.
- Impact investors have a positive outlook for the future despite recent adverse conditions.
Despite a dramatic increase in impact investing growth over the past 10 years, experts say more capital is needed to address current significant and pressing challenges.
A United Approach
Impact investment is a relatively recent term, coined by the Rockefellers in 2007 to put a name to investments intended to generate both financial return and social and environmental good. Interest in environmental impact investing grew considerably after the 2008 financial crisis. But it wasn’t until the 2015 introduction of the U.N. ‘s 17 Sustainable Development Goals (SDGs) that impact investors united behind a collective set of goals.
The SDGs aim to achieve sustainable development for the entire world by the year 2030. The initiative’s strategy includes topics such as sustainable materials, including sustainable plastic materials, shared mobility, responsible consumption, and clean water and sanitation.
Often referred to as “doing good while doing well,” impact investing is part of a broader global strategy to shift financial resources towards more sustainable projects while still realizing a solid financial return.
Impact Investing Trends
Impact investments are made in developed and emerging markets and target a range of returns based on an investor’s strategic goals. The growing market provides capital that can be used to address many of the world’s most critical challenges in areas like renewable energy, sustainable agriculture, and affordable and accessible basic services like housing, education, and healthcare.
The GIIN developed four core characteristics to define what constitutes impact investing:
- Intentionality: The investment must have an intentional desire to contribute to measurable social or environmental benefit.
- Use evidence and impact data in investment design: Impact investments cannot be designed on hunches. They must use evidence and data where available to drive intelligent investment design.
- Measure impact performance: Investments must be managed towards their original intention, including providing performance information.
- Contribute to the growth of the industry: Shared industry terms, conventions, and indicators for describing impact strategies, goals, and performance, as well as shared learnings where possible, enable others to learn from their experience as to what contributes to social and environmental benefit.
To date, impact investment capital has been used for everything from residential property developed to managing online security issues and tackling poverty. Some investors focus on businesses like UBQ Material which take a triple bottom line approach that equally values people, planet, and profit and work towards a truly circular economy.
Impact Investing Trends 2021
Experts agree impact investing can yield appreciable results for both investors and the companies they support. Here’s what some see as the most significant impact investing trends for 2021.
- Climate solutions, including low-carbon investment opportunities, will gain even greater importance.
- Skepticism about ESGs (environmental, social, and corporate Governance) in general will be replaced by a better understanding of how beneficial they can be.
- The biodiversity crisis will transform how impact investors deal with habitat destruction, over-harvesting, and the introduction of invasive species.
- Social inequalities will continue to test impact investors’ creativity with some willing to risk failure to pursue solutions.
As we enter a new year, the world remains challenged by a global pandemic, an urgent climate crisis, and stepped-up regulatory requirements for the investment industry. To deal with these and other pressing issues, impact investment will become a more mainstream investing option that can empower the creation of a world where diversity, inclusiveness, and sustainability thrive. UBQ remains committed to being a global leader in combining profit and purpose to help achieve the 17 SDGs while working towards a zero-climate future where resources don’t have to be discarded, and waste is completely eliminated