A growing number of pension funds, insurers and others are discovering that assets designed to do good in the world may also be the best way to ensure the long-term strength of their portfolios. In a new four-part series, we look at impact investment’s growing role in future-proofing institutional investment.
It’s an enduring challenge for institutional investors: how do we allocate our portfolio so it can capture real levels of capital growth, mitigate the impact of market falls, and make good on the promises we’ve made to our end-clients and members?
What’s more, how can we deliver this financial resilience while ensuring we invest in the types of assets our stakeholders would want and expect us to?
Financial resilience – global resilience
When you’re an insurer or pension scheme with prescribed commitments and liabilities to meet, the answers are never easy. In a world of rising inflation, myriad geopolitical risks, and long-term systemic factors like climate change and rising wealth inequality, the challenge to find assets that can navigate so many headwinds has never felt tougher.
In the past, investors have often simply looked for investment opportunities that could fulfil the financial side of the equation. But many are discovering that the strongest potential risk-adjusted return may, long term, come from assets that can contribute to resilience of the wider world too – whether that’s addressing global warming, poor housing, or global health.
Growing capital momentum
The level of institutional capital flowing into these ‘impact investments’ is gathering pace. In autumn 2025, Brookfield Asset Management – one of the world’s largest alternative investors – raised $20 billion for its second Global Transition Fund. This makes it the world’s largest private fund dedicated to the transition to clean energy.
Over the same period, green real estate investors Jonathan Rose Companies raised $660 million for its latest Affordable Housing Preservation Fund VI. Seeking to acquire and preserve affordable multi-family housing across US cities, the fund series has raised over $1.5 billion to date.
Major investors are investing in these opportunities not just for the social or environmental good they can do. Just as crucial is how they can allow investors to participate in the key economic trends shaping the world.
Investing in structural shifts
Global investment in clean technologies – renewables, nuclear, grids, storage, low-emissions fuels, efficiency and electrification – is on course to hit a record $2.2 trillion in 2025 according to the International Energy Agency. That’s double the new investment in fossil fuels and marks the fifth consecutive year of significant growth in the market.
Another key global trend is urbanisation. As cities expand, governments are recognising the need to build infrastructure like housing, transport and digital and power-systems that are resource-efficient, reduce pollution and are resistant to climate hazards like extreme weather and flooding. It’s projected that more than $100 trillion will need to be invested in infrastructure between now and 2040.
Of course, not all infrastructure has a positive impact. However, the World Economic Forum calculates that sustainable infrastructure that intentionally aligns with climate and sustainability targets outperforms conventional infrastructure by over 20% under a scenario where the world is aiming for net zero carbon emissions.
In short, investing with an impact perspective can allow institutions to align with the biggest secular and structural shifts shaping society. That provides portfolios with a solid, long-term foundation for growth and capital resilience regardless of short-term market volatility or economic uncertainty.
Policy and regulatory support
There is also the growing expectation by policymakers, regulators and end-clients themselves that institutional funds should be deployed to help create a better world, not just a larger pool of capital. In the UK, this is reflected in ongoing discussions around the Pension Schemes Bill, where policymakers are exploring how trustees can invest in the long-term interests of both their members and society.
The level of demand shows just how seriously major investors are taking this market. The Global Impact Investing Network (GIIN) estimates the impact investing market has grown by more than 20% a year over 2019-2024, on a compound annual growth basis, to stand at more than $1.5 trillion. A 2024 global survey by investment consultants bfinance found that more than half (53%) of institutional asset owners are currently engaged in impact strategies or intending to enter the space.
Future-proofing in an uncertain world
Around the world, geopolitical upheaval, volatile prices and weak economic growth continue to cloud short-term investment decision-making. Against this backdrop, many institutional investors recognise the value of looking ahead to the very long term to consider which assets and investment opportunities will most benefit (and benefit from) our changing world.
In this mindset, impact investing isn’t a nice-to-have for institutional portfolios – it may be an essential allocation for future success.
Next time: How global trends and geopolitics are putting impact investing centre stage.