New Impact Investing Heavyweights Reshape the Market
Two 2024 reports from the Global Impact Investing Network (the GIIN) reveal more money flowing to impact from larger asset owners.
Key Takeaways
- Both the amount of impact investing assets and the number of organizations making impact investments have approximately tripled over the 5-year period from the end of 2018 to the end of the 2023. The GIIN now estimates that over 3,907 organizations currently manage USD 1.571 trillion in impact investing assets under management (AUM) worldwide.
- Larger investors make up a greater portion of impact AUM. Pension funds and insurers accounted for a combined 18% of organizations sampled but held 48% of impact AUM in 2023. By contrast, pension funds and insurers accounted for 1% of organizations included in the GIIN’s 2018 sample, and contributed 6% of global impact AUM.
- Overall, the impact investing market shows signs of maturing, with large and small investors increasingly shifting how capital is deployed to “play to their strengths”. While private equity remains the most utilized asset class, public debt and equity are experiencing the fastest growth.
Level Setting: the GIIN’s Impact Investment Definition
Investments with the intention to generate positive, measurable social and environmental impact alongside a financial return, and specifically use that investment capital along with engagement or investment terms to positively influence targeted impact results.
A Brief History of the GIIN’s Impact Estimates
Sizing the market is important to compare growth over time in investments intentionally targeting financial and social or environmental returns. Doing so involves complicated calculations of known, potentially overlapping, and somewhat unknown investments. While the GIIN is transparent about its methodology, ImpactAlpha also does a good job of explaining possible “fudge factors”.
The GIIN began estimating the size of the impact investing market in earnest with the release of its April 2019 Sizing the Impact Investing Market report. (Previous attempts primarily involved surveying GIIN membership). This report found that, as of the end of year (EOY) 2018, over 1,340 organizations managed USD 502 billion in impact investing assets worldwide.
In June 2020, the GIIN updated their sizing estimate to be USD 715 billion, but the GIIN did not produce a comprehensive market size report, rather a 10-year retrospective of the impact investing market.
The GIIN released its next comprehensive Sizing the Impact Investing Market report in October 2022, in which it estimated as of EOY 2021 over 3,349 organizations managed USD 1.164 trillion in impact investing AUM worldwide.
And most recently, the GIIN’s October 2024 (EOY 2023) market sizing report found that over 3,907 organizations currently manage USD 1.571 trillion USD in impact investing AUM worldwide.
The Makeup of the Impact Investing Market
While the market size shows impressive growth, understanding who’s investing reveals important shifts in the industry.
In 2019, asset managers were the most represented in making impact investments (64%) and managed the most AUM (51%). Development finance institutions (DFIs) — financial institutions often established and owned by governments or nonprofit organizations to finance projects that would not get financing from commercial lenders — represented 2% of organizations but managed 27% of AUM. Notably, pension funds and insurers accounted for only 1% of organizations contributing 6% of global impact AUM.
In 2022, fund managers accounted for 63% of the sample and represented 61% of impact AUM. DFIs continued to punch above their weight, representing just 5% of organizations in the sample but accounting for 27% of impact AUM. Insurers are not specified in a distinct breakout group so it’s tough to make any comparisons to their current representation, but pension/ retirement funds were listed as representing 2% of the sample.
In 2024, the report combined both representation and AUM into the following chart for a clear comparison of organization type and influence. Representation remains about the same as previous years for investment managers and DFIs. However, the percentage of AUM is way down for both, 27% and 6% respectively. By contrast, pension funds and insurers accounted for a combined 18% of organizations sampled but held 48% of impact AUM in 2023.
The report concluded that Institutional Asset Owners (IAOs), like pension funds, insurance companies, and sovereign wealth funds, are starting to prioritize impact-driven investments and are helping to fuel impact growth. With USD 80 trillion in assets, these investors have significant global influence, often serving as creditors to governments. Their engagement in impact investing can channel substantial funds toward initiatives that promote a just transition, especially in newly industrialized nations, and provide long-term financing to support sustainable growth in developing countries.
State of the Market 2024 = Increasing Maturity
While the GIIN’s market sizing research focuses on the “how much” and “by whom”, its annual survey of top impact investors drills down on the “where” and “how”. The GIIN published this go-to source for impact investing trends and performance updates in September, capturing data from 305 organizations that manage at least USD 10 million in impact AUM or have made at least five impact investments. The survey covers a wide breadth of topics, from AI usage to a potential bounce-back in blended capital projects.
Even though the survey respondents represent a much smaller sample size than the sample used to estimate impact investing market size, taken together these reports provide valuable insights into impact investing trends. The GIIN uses a subset of repeat survey respondents for trend analysis, and also categorizes respondents based on their size, geography, and investment preferences.
Predictions about impact investing’s “mainstreaming” are nothing new to long-term impact investors. Observations that the market is maturing seem more accurate given the requirements of institutional asset owners. Signs of a maturing market from the survey include:
- Asset Classes and Allocation: While private equity remains the most utilized asset class, public debt and equity are experiencing the fastest growth.
- Investment Strategies: Institutional investors are adopting holistic approaches, integrating impact strategies across both private and public assets.
- Measurement: Investors tend to be satisfied with financial and impact returns, though measuring impact remains fragmented.
Conclusion: Big Money, Big Changes
Impact investing AUM continues to grow, buoyed primarily by larger, more institutional investors entering the market with bigger chunks of investment capital. These investors tend to prefer more stable, mature, growth businesses, and they have begun to look across their portfolios of both private and public assets to achieve impact goals. If institutional investors continue to drive impact investment growth — which is a big if given the current political climate, especially in the U.S. — we should expect more diversification and sophistication in available impact investment options.
Sources
The following sources are referenced in this article. We encourage you to review them for additional information.
- And the size of the impact investing market is $1.5 trillion…ish | ImpactAlpha (paywall)
- Sizing the Impact Investing Market 2019 | the GIIN
- 2020 Annual Impact Investor Survey | the GIIN
- Sizing the Impact Investing Market 2022 | the GIIN
- Sizing the Impact Investing Market 2024 | the GIIN
- State of the Market 2024: Trends, Performance and Allocations | the GIIN
- Impact Investors Are Larger, Skeptical Of AI For Now, Finds The GIIN | Ann Field writing for Forbes
- GIIN survey: Global impact market reaches $1.57trn AUM | Impact Investor
- Impact investments worldwide break through US$1.5tn — 2024 GIIN report | Pioneers Post
- Impact investing has entered the next stage of its evolution | New Private Markets (registration required)
- Impact Investing Is Turning Mainstream, Report Finds | Penta
The “publications” section of the GIIN’s website contains links to past surveys and market sizing reports, as well as other research papers.
StartingUpGood supports fresh entrepreneurial approaches to social impact. FOLLOW US on social media:
Check out SDGCounting for the latest news on tracking the progress of the Sustainable Development Goals. #SDGs #GlobalGoals.
Disclaimer: This article uses various LLMs to research, edit, and proof-read. All content for the article was hand-curated and checked for quality.
