In the second part of our four-part series on future-proofing institutional investment, we examine the global trends that are making impact investing a must-have for long-term portfolio resilience and growth.
Impact investing is the practice of investing to deliver defined, measurable social or environmental outcomes as well as a financial return. As such, it has sometimes been viewed as one step up from philanthropy: laudable – but probably not something to base your whole investment policy on.
Today, that perception is shifting swiftly. Rather than investing in projects and assets simply deemed as ethical or praiseworthy, impact investing goes to the heart of the economic and social shifts that are shaping our world – and, therefore, opportunities that no institutional investor can afford to ignore.
These include:
The transition to clean energy
Whatever confrontations may be taking place over ownership of the world’s oil resources, the momentum to move to clean energy is unstoppable.
Renewable energy overtook coal as the world’s leading source of electricity in 2025, with many countries setting new records in solar power generation. Investment in renewables was on course in 2025 to hit a record $2.2 trillion – twice the level of investment in oil, natural gas and coal.
And this investment growth isn’t just about honouring global climate agreements – it’s down to economics. Thanks to technological innovation, more efficient supply chains and greater economies of scale, 91% of new renewable energy projects are now cheaper than fossil fuel alternatives, according to the International Renewable Energy Agency (IRENA).
By limiting dependence on international fuel markets and improving energy security, the business case for renewables gets even stronger. Add in game-changing technologies like battery energy storage (which has dropped in cost by 93% since 2010 according to IRENA), hybrid energy systems, and AI tools to optimise grid transmission, few sectors can appear to offer more compelling investable opportunities.
The rise of urbanisation
Over half the world’s population is now living in cities; by 2050 that figure is expected to be 70%. The growth of cities is often associated with pollution, greenhouse gases and urban sprawl. But policymakers are recognising the economic imperative to invest in sustainable urban infrastructure, be that green/smart buildings and mass-transit systems – or structures that are resilient to flood, heat and other impacts of climate change.
For institutional investors themselves, investing in urban infrastructure with strong sustainability credentials provides their portfolio with future-proofing against global warming, resource insecurity and supply-chain breakdown.
As the World Economic Forum put it in an April 2025 analysis: “Infrastructure investors have a unique opportunity to accelerate the transition toward a more sustainable global economy while enhancing their long-term portfolio performance.”
Resource scarcity
As the global population continues to grow and living standards continue to rise, the pressure on finite resources like water, land, and minerals is becoming one of the most pressing issues of our times. But equally, it’s set to drive investment in sectors like sustainable agriculture, water management, and resource recovery/recycling technologies.
To take one example, the global electronics recycling market is valued at $43.2 billion in 2025. The market is slated to reach $147.9 billion by 2035. That’s a compound annual growth rate of more than 13% as the world scrambles to recover the precious metals residing in the 62 million tonnes of e-waste thrown away each year.
Ageing population and AI
Healthcare has long been a central theme of impact investment portfolios, providing a wide array of opportunities for measurable social impact and strong, long-term returns. Today, the pressure of an ageing population and age-related diseases on health systems is demanding new, inclusive treatments and health technologies that can be applied at scale.
For example, artificial intelligence (AI) is seen to have the potential to transform healthcare and eldercare by offering solutions for early disease detection, personalised care, and for independent living through the use of robotics and AI-powered wearable devices.
Major players exploring the AI-powered ageing and elder care market are reported to include IBM, Intel, Microsoft, Google, Nvidia and Amazon. Of course, the application of AI in the care sector presents myriad ethical, privacy and risk issues (not to mention the vast amounts of water and energy that AI data centres currently consume). But this is where seasoned impact investment portfolio managers can add value, providing the due diligence to ensure that opportunities align with investor values.
An investment imperative
These are only a few examples of how impact investing and global megatrends combine. Impact investing is not about altruism. To achieve the future we want (and need), impact investing is backed by hard-nosed economic and investment logic.
This is evidenced by the capital that many of the world’s largest investors are seeking to allocate to it. Last year, Japan’s $1.8 trillion Government Pension Investment Fund (the world’s largest) announced it was exploring a major shift into impact investing to help address some of the country’s real-world challenges, sending ripples through the whole Japanese asset management sector. ABP (Europe’s biggest pension fund), is planning at least €30 billion of impact investments by the end of the decade, partly by reallocating from companies that harm the climate and biodiversity.
In short, the world’s biggest impact investment themes are also being recognised as some of its strongest drivers of growth and economic resilience. Where some of the world’s biggest institutional investors are choosing to go now, the rest of the market is surely likely to follow.