Just How Big Is the Market for Impact Investing?
The Latest ESG Data: Chart shows growth in thematic ESG fund flows
Although a widely accepted definition of impact investing has emerged from the Global Impact Investing Network (GIIN), there are still many measurement frameworks. In line with this divergence in understanding and measuring impact investing, there is currently no perfect methodology for determining the size of the Sustainable Investment (SI) market. One estimate was released by the GIIN in June 2020 that put the size of the impact market at USD 715 billion.
Thematic SI investments, which focus on identifying opportunities in macro-level sustainability trends and themes, provide another reasonable proxy for assessing market trends for impact investment while being broader than the impact domain. Figure 1 below shows clear, sizable growth in thematic ESG fund flows since 2017.
Meanwhile, the International Finance Corporation – a thought and practice leader in the world of impact investment – estimates that investors in public and private markets can potentially contribute USD 8.8 trillion and USD 71 billion respectively towards impact, as shown in Figure 2.
In the same report, the IFC also highlights the significant increase in the Assets under Management (AuM) at “impact-branded” publicly traded funds. The phrase “impact-branded” is an important one to note at this time of rapid growth in, but slow standardization of, the impact market, as it highlights the lack of certainty as to whether what investors are calling “impact” actually qualifies as this. Regardless of the terminology used or framework you prefer, it is clear that the opportunity within impact investing is vast and is only growing.