Investing for impact doubles to $ 502 b as savers seek to do good

Tuesday, 9 April 2019 00:38 - - {{hitsCtrl.values.hits}}

Thomson Reuters Foundation: From renewable energy schemes to services for domestic abuse survivors, the amount of money estimated to be invested in businesses with a social or environmental impact has doubled, according to a study published on Monday.

So-called impact investing is still only a small part of the overall industry, but has grown rapidly in the last decade as a new generation of investors seek to use their capital to do good as well as make money.

The latest research from the Global Impact Investing Network (GIIN), an industry body, put the overall value of such funds at $ 502 billion – double the previous estimates.

“The impact investing market is seeing incredible momentum. This is a result of shifting sentiments about the role of capital in society,” said GIIN Chief Executive and Co-Founder Amit Bouri in an email.

“More investors are seeing that there are social and environmental repercussions, positive and negative, from every investment that is made,” he said.

The estimated value was based on data from more than 1,300 impact investors around the world, including asset management firms, banks, pension funds, insurance companies and foundations, many of which are members of GIIN.

The sum is still a drop in the ocean compared to the wider investment industry, worth $76 trillion in 2018, according to Boston Consulting Group, the consultancy firm. But it is estimated to be growing rapidly, driven in part by a demographic shift of wealth into the hands of women and millennials, who want to invest with a purpose beyond profit.

As more money flows into the sector, some organisations, including the World Bank and the Organisation for Economic Cooperation, have expressed concerns about a lack of industry standards.

Critics say this could lead to “impact washing”, where companies seek to disguise unpopular practices or overstate the impact of their investments to make themselves look good.

Impact investing was in the spotlight last month when one of its prominent practitioners, Bill McGlashan, a former Senior Executive at private equity firm TPG Capital, was charged in connection with the US college admissions scandal.

The involvement of McGlashan – who co-founded TPG’s impact investing venture, Rise Fund, with U2 front man Bono – sparked debate about whether his personal misconduct would taint the wider reputation of impact investing.

“As the industry grows, we need to be sure it scales with integrity, ensuring good intentions translate into real impact results,” said GIIN’s Bouri.