Impact Investing in an Economic Downturn: Will Growth Continue?

StartingUpGood Magazine
4 min readMay 13, 2020


Written by Connette Blake

Image Source: Pixabay

The term Impact Investing was coined in 2008, coinciding with the start of the Great Recession. While the sector grew steadily throughout the following years, it benefited from a predominantly bull market. Looking ahead, will investors continue to prioritize impact investments even during the current economic downturn and impending recession?

A recent Financial Times article reported that “9 out of 10 investors would prioritize a company’s economic recovery over its ethical principles, in a sign that investor commitment to more responsible forms of investing is faltering in the market downturn.”

This outlook, however, may be shortsighted, with the article pointing out that institutional investors that have longer time horizons continue to show interest in ESG investing.

Findings from other sources show increases in ESG investments even as the pandemic began. Investment research platform Morningstar Direct found that “in the first four months of 2020, investors poured a record of at least $12.2 billion into funds that say they invest in environmental, social and governance practices… more than double the amount that ESG funds attracted during the same time last year.”

Of course, these resources refer to the broader investment category of ESG that incorporates a company’s environmental, social and governance performance in investment decisions. The more narrowly defined category of impact investing seeks investments that intentionally generate positive, measurable social and environmental impact alongside a financial return. However, both of these investment strategies demonstrate that investors are interested in more than just short-term financial returns.

In a related article, the Financial Times points to evidence that impact investments in food security, education and environmentally sustainable infrastructure are attracting new funds during the pandemic and performing relatively well. This may be because “the coronavirus has forced people to think about how to live more sustainably,” and infrastructure investments in categories like renewable energy are seen as having lots of opportunities for growth.

Indeed impact investment professionals see the COVID crisis as a “spur to action” for the impact investment sector. Dirk Meuleman, CEO of Phenix Capital, said in a recent interview (Registration Required):

“We see the need for collective action; we see the cost of externalities becoming very visible; we see the need for investing in medicine development.”

This sentiment aligns with our previous reporting of how impact investors continue to lean in to impact by looking for opportunities to commit additional capital to their portfolios during the pandemic.

But is growth in impact investing enough?

During the opening panel of this week’s Mission Investor Exchange national conference, leading foundations that have already committed to 100% mission alignment in their endowments advocated for the need for structural change.

According to reporting by ImpactAlpha (Paywall), the Rockefeller Foundation’s Rajiv Shah said:

“I just don’t think $10.5 billion a quarter in ESG funds is going to do anything to change the nature of our society, and we deserve a discussion of a more bold set of actions… I look at the scale of what we’re dealing with today and am worried that it’s just not big enough as an instrument yet to change the nature of inclusion and sustainability in the modern economy.”

Committed impact investors are likely to look for new and bigger ways to drive societal and environmental change during — and possibly because of — the COVID-19 pandemic and the global economic crisis it has spawned. Investors who use positive ESG screens to make investment decisions may not prioritize impact over financial returns. However, if ESG investments continue their strong performance even during the economic downturn, why would ESG investors change course?


Connette Blake has over 15 years of experience advising organizations on their marketing, communications and fundraising strategies. Since joining StartingUpGood, Connette has worked to promote social impact in startups and advance impact investing. You can contact Connette at



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