Signals | August 10, 2021

IFC puts a rosy spin on a tough year for impact fundraising

David Bank
ImpactAlpha Editor

David Bank

Investments intended to create, contributing toward and measured for impact reached $636 billion last year, up from $505 billion in 2019, reports the International Finance Corp. The broader market for investments at least intended to create impact, but without clear contribution or measurement, increased to $1.65 trillion from $1.57 trillion.

Combining the two tallies, the IFC identified $2.3 trillion being invested for impact in 2020, or about 2% of global assets under management.  

The IFC used the increases in cumulative assets to buttress its conclusion that, “impact investing has seen a boost in popularity during the COVID-19 pandemic,” driven by heightened awareness of social challenges, racial and gender inequality and climate change. “Impact investing remains a small market niche, but one that is attracting growing interest.”

But as in other recent surveys,  the pattern in the underlying data is murkier. The IFC reports, for example, that 2020 saw less than half as many new impact funds as the previous year, and that fundraising for developed markets, emerging markets and global funds tumbled from $39.8 billion in 2019 all the way down to $14.2 billion in 2020. 

That more sober reality comports with anecdotal reports of the, not surprisingly, tough fundraising environment last year. In a separate, earlier review, the Global Sustainable Investing Alliance found only $444 billion in global impact investing assets in 2020, and only $212 billion in U.S. impact investing. Both were sharp drops from the alliance’s 2018 review, but a footnote cautioned that the numbers aren’t directly comparable (see, “The numbers may be fuzzy, but the trends are clear when it comes to sustainable investment”).

Other takeaways from the IFC’s Investing for Impact: The Global Impact Investing Market 2020:

Quasi-public. The report from IFC, part of the World Bank Group, highlighted the continued dominance of governmental development finance institutions and multilateral banks.

In the core impact investing market, $286 billion in investments were managed by private asset managers, while $349 billion was managed by quasi-public development financial institutions. In the broader market for intended impact, private funds managed $310 billion, compared with $1.34 trillion for DFIs and multilateral banks.

Impact management and measurement. If indeed there has been a decrease in impact investment assets, at least part of the decline may be a salutory effect of increased rigor and transparency.

At least 135 funds from 33 countries have signed on to the Operating Principles for Impact Management, 97 have published disclosure statements and 64 have provided summaries of their independent verifications (see, “What we learned from 30 impact verifications” by BlueMark’s Christina Leijonhufvud).

Said RockCreek’s Afsaneh Beschloss, “The maturity of the impact investing market in 2020 is an encouraging signal for investors.”