Impact investing is a sensation taking the global equity markets by storm as the need to have a positive impact socially and on the environment becomes a norm. Gone are the days when investors invested, merely for returns. The proliferation of impact investing advisory services, providing much-needed data and insights, is encouraging people to invest for a purpose.
Impact investing market growth:
Thanks to impact investing advisory services, impact investment activities have continued to increase steadily. As more people and investment funds engage in sustainable investing, the global impact investing market has also continued to expand. Valued at under $135 billion in 2015, the market has expanded to over $700 billion as of 2020.
In addition to impact investing advisory services encouraging and spearheading impact investing initiatives, governments worldwide are also playing an essential role in encouraging impact investing. Supportive government policies such as tax breaks and reliefs have had a hand in encouraging retail and institutional investors to engage in impact investing rather than just pursuing returns.
The top sectors at the center of impact investing are energy and financial services. Most of the sectors at 55% are in developed markets and 40% in North America. According to an impact investor survey by Global Impact Investing Network, over $1,300 organizations manage over $500 billion in impact investing assets worldwide.
The number of organizations as well as investment funds pursuing sustainable investing firms is expected to increase as more impact investing advisory outlets provide the much-needed insights on ideal impact investment opportunities.
Asset managers have been the most aggressive in embracing impact investing advisory services offered by the likes of Altruist League to uncover as the pursuit for ESG investment opportunities heats up. Likewise, asset managers’ account for more than 60% of impact investments made worldwide. Foundations come distant second with a 21% share of the total investments geared towards impact investing. Banks and financial institutions account for about 4% of investments in the global impact investing market.
Impact investing by block:
Impact investing has mostly been embraced by organizations and firms in developed countries. Likewise, more than half of institutions, investors, and philanthropists engaged in impact investing are in the U.S and Canada, accounting for about 58%. Organizations in Europe account for about 21%, with organizations with headquarters in Asia accounting for about 8%.
Impact investing advisory efforts appears to be having the biggest impact in Europe. The vast trading block leads the impact investing space with about 54% of the market share. However, given the sheer size of the block, its growth appears to be relatively less. Germany, France, and the U.K are the biggest contributors to impact investments in Europe thanks to friendly government policies, some of which are aimed at combating climate change while addressing social issues.
North America, made up of just two countries, controls a substantial amount of market share in impact investing at 38%. As a single market, the U.S plays host to the biggest market for impact investing given the number of institutions, investors, investment funds, and philanthropists investing for a purpose to solve environmental and social issues.
Asia remains a preferred market for impact investors, given the range of social issues and a vast landscape to absorb impact investing. India leads the pack as one of the biggest market attracting impact investing capital, given the country’s $1 trillion economy that is backed by a huge population.
Though accounting for a minimum amount of market share in the global impact investing market, Africa remains an attractive destination for impact investing. With a reasonable growth rate, Asia Pacific is expected to garner more market share and become a net user of impact investing capital in the future.
India and Australia impact investing growth:
India is increasingly becoming the epicenter of impact investments. Between 2010 and 2016, the country attracted more than $5.2 billion in impact investments coming from over 50 active impact investors. India’s edge as a hub for impact investments is due to its growing population as well as stable financial markets and underlying economic growth.
Australia is another market that is experiencing growing momentum and interest in impact investment thanks to the proliferation of impact investing advisory services. While impact investing spans a broad spectrum of investors in Australia, institutions continue to dominate the dollar value of available investments.
More than two-thirds of Australian investors expect impact investing to become a significant part of the investment landscape as more people seek to invest for a purpose rather than pursuing returns. Active investors are expected to triple the size of their impact portfolios over the next few years.
The proliferation of ESG investing advisory services providing insights on sustainable investing is the catalyst behind the steady growth of the global impact investing market. Also, millennial investors are expected to continue strengthening sustainable investing, as most of them invest for returns and want to impact society.