Market sizing studies help institutional investors, fund managers, regulators and policymakers accurately assess opportunities and stay competitive. But since the last edition of the Global Impact Investing Network market survey, which was based on 2019 research, there has been only scant information about a rapidly growing market that had been trending toward $2 trillion on eve of the pandemic.
New country-level data is filling out the picture. The upshot: the impact universe is experiencing strong asset growth and returns, and there is broad potential for new investment in markets from the UK and India to Japan and Ghana.
The new research comes from National Advisory Boards – the country-level secretariats for the Global Steering Group for Impact Investment (GSG) – in eight countries, including some of the largest economies in the world. Since the start of 2022, these NABs have released studies providing key insights on rising investment activity on one hand, and quantitative figures detailing unmet needs on the other.
Impact momentum
The UK impact investment market was worth an estimated £58 billion in 2020, according to the UK’s Impact Investing Institute, which, with EY and supported by the Department for Digital, Media, Culture and Sport and Big Society Capital, quantified the size of the market for the first time. A comparable amount, £53 billion of investments, were categorised as impact-aligned.
Notably, 90% of impact investors surveyed were realising returns at or above target rates, according to the report, “Estimating and Describing the UK Impact Investing Market.”
The report, and others like it below, profile the scale and breadth of investments that fit with the GIIN’s definition of impact investing, or investments made with an explicit intention to generate positive social and environmental outcomes.
The Netherlands has emerged as a global leader in impact investing, with data from the Netherlands National Advisory Board and KPMG – published in the “State of the Dutch Impact Investing Sector” – showing that impact assets account for 4%-6% of total AUM, or some €150-€180 billion.
The report calls on Dutch institutional investors to make a public commitment to double impact investing allocations to a minimum of 10% of AUM by 2025 and allocate at least 40% of their total impact investments to emerging and developing markets, where the Sustainable Development Goals face a huge financing gap.
Impact investments are growing rapidly in Asia as well. Japan’s impact investing market increased by some 250% in 2021 to over JPY1.3 trillion ($10.17 billion), according to a report issued by Japan Social Innovation and Investment Foundation (SIIF). More major commercial banks and asset management firms are entering the market, with the number of financial institutions involved in impact investing rising to 31 from 20 the previous year.
Across India, over 300 impact-focused businesses raised a total of $7 billion in 2021, a 135% increase on 2020, according to “2021 in Retrospect: India Impact Investment Trends” from the Indian Impact Investment Council. Looking across six themes and sectors, including climate, agriculture, education, financial inclusion, healthcare, and technology for development, the research shows that 62 women-founded impact enterprises raised $1.5 billion, a significant improvement compared with prior years.
Filling gaps
Other recent country-level studies direct investors to sector-based opportunities and quantify the gaps to achieve sustainable growth over the next ten years or more.
In Ghana, the price tag for achieving the SDGs is estimated by The World Economic Forum to be $522 billion by the end of 2030. Impact Investing Ghana’s report, “Unlocking Private Sector Capital for Profit and Impact,” looks to the the nation’s $5.8 billion pension industry and its burgeoning private capital market, which last year heralded the launch of the Ghana Venture Capital and Private Equity Association, to help fill the gap.
Some countries are producing studies that highlight what is possible with impact investment. “The Investment Ecosystem in Central America” from La Plataforma de Inversión de Impacto Centroamericana showcases the growing mass of social entrepreneurs who are developing innovative solutions to the regions’ particular social, environmental and political challenges, and suggests that Central American countries could act as an innovation testing ground for scaling impact-generating projects.
Meanwhile, the Table of Impact Practitioners’ “Impatient Readiness: The State of Social Finance in Canada” calls attention to the investment potential within Canada’s indigenous economy. Key to meeting that potential is the ongoing need for more access to capital, particularly in the areas of business development, food sovereignty, renewable energy, housing, and technology.
New countries continue to join the GSG’s network of NABs – the most recent being Turkey – indicating growing momentum around developing and promoting impact markets. A recent report from UNDP highlighted no fewer than 27 investment opportunity areas across nine priority sectors in Turkey, ranging from technology and communications to education and healthcare.
Forthcoming research is expected from Zambia, Colombia and other GSG NAB members. It is reasonable to expect that those countries will be experiencing similar profound shifts in the deployment of capital to achieve measurable social, economic, and environmental value.
Market sizing studies are essential to show where the impact community has come from and how it is growing. They are just as important to demonstrate the enormous, untapped potential in impact investment’s ability to improve people’s lives and benefit the planet.
Gila Norich is Head of Knowledge Development at The Global Steering Group For Impact Investment.
For guidance on impact investing market sizing, see “Sizing Impact Investing Markets,” a manual released by the GSG in 2019 to inform market sizing efforts across its network. The GSG plans a refresh to this report in 2022.
The GSG is also working in partnership with the EVPA and a consortium of European National Advisory Boards to harmonise market sizing methodologies and data collection strategies.
