The impact investing market
Introduction
How to use these resources
Resources in this module
Glossary of terms
We have put together a glossary of terms for impact investing
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Impact investing market structure, size and trends
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Sizing the Impact Investing Market 2022
Global Impact Investing Network (GIIN)
Reading time: 10 minutes
The GIIN’s 2022 market sizing report estimates the current size of the global impact investing market to be $1.164 trillion, revealing its considerable growth in recent years. Methodology for reaching this estimate is covered in Appendix 1.
What the reviewer found helpful:“Diagrams on pages 3-4 provide a useful visual breakdown of how impact investing is spread across organisations and geographies” Anna Martinovic
Specific section to read:
Pages 2-7
Introductory
✔ Recommended
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Size of the European Direct Impact Investment Market 2022
European Venture Philanthropy Association (EVPA)
Reading time: 10 minutes
This report summarises the main takeaways from the first harmonised European impact investment market sizing exercise, organised by the European Impact Investment Consortium. The size of the direct impact investment market in 2022 is estimated to be €80 billion.
What the reviewer found helpful:“The cheat sheet on page 3 and infographic on page 8 provide an engaging summary of the findings” Anna Martinovic
Specific section to read:
Pages 3-14
Introductory
✔ Recommended
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BSC Annual Market Data
Big Society Capital (BSC)
Reading time: 5 minutes
Every year, BSC collates and publishes data on the estimated size of the social impact investment market in the UK. The most recent figures value the UK impact investing market at £7.9 billion, reflecting an almost ten-fold growth over the past ten years.
What the reviewer found helpful:“An accessible and brief snapshot into current trends in the UK impact investing market” Anna Martinovic
Introductory
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Annual Impact Investor Survey, 2020
Global Impact Investing Network
Reading time: 30 minutes
The GIIN’s 2020 Annual Impact Investor Survey details the investment activity of 294 leading impact investors, collectively managing USD 404 billion, over 2019 and forecasted into 2020. The survey has shown that impact investing has growth in depth and sophistication over 2010, with a rise in realised gross returns and assets over time and impact measurement and management practices.
What the reviewer found helpful:“The interactive charts were particularly useful for representing the impact investor survey data”
Serena Grover
Intermediate
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Creating Impact: The Promise of Impact Investing (Chapters 2 & 3)
International Finance Corporation
Reading time: 90 minutes
Chapter 2 presents a deep dive into some of the challenges facing the impact investing world, exploring financial returns, impact management and frameworks, and regulatory barriers. Chapter 3 explores the scalability of the concept of impact investing and the importance of collective action and collaboration for the future.
What the reviewer found helpful:“A very detailed paper covering impact measurement theories and frameworks and using helpful diagrams to aid explanation.”
Mhairi Littlewood
Advanced
Impact investing across asset classes and public/private markets
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Impact investing across asset classes
World Economic Forum
Reading time: 15 minutes
This is a list of all the available types of impact investments, explaining how they fit into the mainstream assets classes, cash, fixed income, investment funds, equity, real estate etc. and helping readers get a grasp of the impact investment landscape. A spotlight on social impact bonds is included as these do not sit within a mainstream asset class. It also explains why some asset types, (e.g. commodities, hedge funds) are not available as impact investments.
What the reviewer found helpful:“I found the real examples of actual impact investments brought the information to life and deepened my understanding.”
Rebecca Lagan
Intermediate
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Investing for impact: Case studies across asset classes
Bridges Ventures/Parthenon Groupp/Global Impact Investing Network
Reading time: 2-3 hours
The report maps the Impact Investment market in a framework that resonates with investors by mapping the impact investment sector case studies along the traditional asset classes, resulting in an Impact Investment Asset Allocation Framework (AAF). All asset classes have shown development of impact investment themes and clarity is emerging around the returns that the sector can generate. The AAF is organised along two key dimensions: investor motivation in connection with returns (Financial First or Impact First) and the asset class (as per traditional asset allocation) distribution.
What the reviewer found helpful:“The layered structures across asset classes and how the use of layered structures is helping to drive money into new impact areas.”
Intermediate
Supply (investors) and demand (investees)
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Who is making impact investments?
Global Impact Investing Network
Reading time: 1 minute
A list of a wide variety of investors, both individual and institutional who make impact investments.
What the reviewer found helpful:“A short and quick summary of the types of investors interested in impact investing”
Mhairi Littlewood
Introductory
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Navigating investor types and landscapes
Global Impact Investing Network
Reading time: 10 minutes
The article looks at a variety of investor types as well as the role of sponsors and placement agents in marketing an impact product. Acts as a useful guide to the different investor profiles who may invest in impact investments, their specific nuances and what to consider when marketing an impact investment to them. The reading also has a wide range of additional resources for those who require more in-depth information on specific sections.
What the reviewer found helpful:“A high level overview on what to consider when marketing an impact product”
Chloe Mallo
Intermediate
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Impact Investing Handbook (Chapter 2)
Rockefeller Philanthropy Advisors
Reading time: 45 minutes
This chapter of the report sets out the Impact Capital Chain, which is the flow of capital from the asset owners, passing through various intermediaries, the investable enterprises and eventually down to their customers or beneficiaries. It then describes the role of each of the players in the chain and touches on the evolution of fiduciary duty with regard to ESG integration. There is a link to an interesting video on this featuring Al Gore.
What the reviewer found helpful:“I liked the diagrams which helpfully illustrated the wording.”
Rebecca Lagan
Intermediate
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Investor motivations for impact: A behavioural examination
Barclays
Reading time: 90 minutes
The report outlines findings from research undertaken on investor motivations for impact investing. Highlights the vital importance of continued education and knowledge sharing and developing narratives around the specific themes that impact investments address in increasing investor engagement. The report notes a shift in perception as investors would expect close to, or above, market returns from an impact investment and construe the shift as being indicative of of a maturing sector, and a growing understanding of the case for impact amongst investors.
What the reviewer found helpful:“The detailed analysis of investor motivations for impact and the behavioural finance perspective on investor motivations.”
Introductory
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Investing in a better world: Understanding the UK public’s demand for opportunities to invest in the Sustainable Development Goals
Department for International Development
Reading time: 50 minutes
This report provides comprehensive analysis of DFID’s investigation into how UK individuals want their pensions and savings to be managed; whether they want the impact on people and the planet to be considered, in junction with financial indicators. Overall, 68% of UK savers would choose to have investments which consider impact alongside financial performance. The survey results indicate that the industry needs to improve accessibility to impactful forms of saving by addressing misconceptions, sharing information, and raising standards on sustainability and impact.
What the reviewer found helpful:“Quite a dense document, but provides a good overview on the strategies to increase sustainable investment within the UK”
Serena Grover
Introductory
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Engaging the supply side of capital and responding to investors needs
Impact Investing Institute
Reading time: 5-10 minutes
This collaborative document outlines advice from market building organisations about how to best engage with investors when trying to facilitate the growth of the impact investing market. It addresses common investor needs and FAQs, such as how to best use evidence, maintain political independence, sustain conversation, and prioritise engagement strategies. Two case studies are briefly outlined at the end. Users may benefit from reading the report on ‘supporting the demand side’ in conjunction with this document to get a better-rounded picture of both sides of the impact investing market.
What the reviewer found helpful:“The document offers high level ‘bullet point’ considerations for those trying to engage with institutional investors, particularly if they work for independent bodies” Anna Martinovic
Introductory
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The role of NABs in supporting enterprises and demand-side actors
Impact Investing Institute
Reading time: 10 minutes
This document uses insights from global NABs (National Advisory Boards) to reflect on how and when support for actors on the demand-side of impact investing is most effective. A particular focus is given to small and medium sized enterprises (SMEs). Spotlights on NABs in 3 separate countries (UK, South Africa and Zambia) are given. These each reflect on how specific demand-side challenges in their regions have shaped their programme design. Users may benefit from reading the report on ‘engaging the supply side’ in conjunction with this document to get a better-rounded picture of both sides of the impact investing market.
What the reviewer found helpful:“The 8 top tips on page 3 are well reasoned and detailed, even for those already familiar with the market.” Anna Martinovic
Intermediate
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Building impact investing knowledge and skills of local actors
Impact Investing Institute
Reading time: 10 minutes
This short paper reflects on the importance of building knowledge and capacity for impact investing among key market stakeholders, including local authorities and investors. The top tips cover the key considerations for market building organisations trying to address this problem. The UNDP SDG Impact Initiative, Bertha Centre for Social Innovation and Entrepreneurship in South Africa, and The Impact Investing Institute share their approaches and experiences in different parts of the world.
What the reviewer found helpful:“The document sheds light on the lack of awareness about impact investing among those who would benefit from it most, and potential global solutions to this” Anna Martinovic
Introductory
Impact investing strategies
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Impact investing: Strategy and action
Rockefeller Philanthropy Advisors
Reading time: 30 minutes
This guide explains how to take practical steps towards implementing your first impact investment. It talks through three stages of developing an impact investing strategy: prepare, build and refine. Case studies throughout provide helpful examples to support the content.
What the reviewer found helpful:“Comprehensive resource that explores how to set up an impact investing strategy that includes some useful case studies, is written in accessible language and includes helpful resources at the back for further research”
Mhairi Littlewood
Intermediate
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How investors manage impact
Impact Management Project
Reading time: 10 minutes
The article is a useful introduction to the IMP’s framework for classifying investments according to three types of impact (avoid harm, benefit stakeholders, contribute to solutions). The reading covers why investors seek to manage impact, how investors set impact goals, the data required to understand the impact of investments and lastly how to classify the impact of a portfolio. Matrixes and flow charts help the reader understand the theory in a more simplistic way.
What the reviewer found helpful:“The matrix and investment examples to contextualise the framework was very helpful”
Chloe Mallo
Intermediate
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Impact Investing: From ideas to practice, pilots to strategy
World Economic Forum
Reading time: 20 minutes
This is a practical guide to building, analysing and managing impact investment portfolios for the professional investor. It covers; – how different investor types approach setting up an impact portfolio and their various organisational structures. – how to define a framework for impact, risk and return and map the target characteristics onto these 3 dimensions. – how to manage the financial and impact risks within the portfolio, including a discussion on diversification.
What the reviewer found helpful:“I enjoyed the 3D risk, return, and impact graphs. Incorporating impact into traditional financial analysis certainly adds another dimension!”
Rebecca Lagan
Intermediate
Market participants: Investors, investees, intermediaries, policy-makers and standard setters
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Catalysing an impact investing ecosystem
Global Steering Group for Impact Investment
Reading time: 2-4 hours
Examines the role of government in the impact investment ecosystem and highlights how policy making can be catalytic based on an analysis of selected countries. Identifies 15 key policy tools that governments use in order to catalyse the impact ecosystem. Provides examples of successful implementation policy tools to catalyse the impact ecosystem in selected countries.
What the reviewer found helpful:“Insights on the phases of policy making to steer the growth/evolution of the impact ecosystem and the country by country toolboxes.”
Advanced
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From the Margins to the Mainstream: Impact investing ecosystem
World Economic Forum
Reading time: 15 minutes
The World Economic Forum outlines the actions required by various agents within the impact ecosystem to mainstream impact investing. It gives detailed suggestions across all aspects of the ecosystem; from capital providers, Development Finance Institutions (DFIs), foundations, pension funds and insurance companies, university endowments, sovereign wealth funds, and investment funds. This chapter also outlines the actions financial intermediaries should take to create liquidity, reduce risk, and lower transaction costs, to facilitate a more fluent payment mechanism.
What the reviewer found helpful:“The flow charts help to visualise where improvements can be made along payment mechanisms within the sector to mainstream impact investing”
Serena Grover
Advanced
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Final report: Growing a culture of social impact investing in the UK June 2019 (pp. 28-29)
Implementation Taskforce
Reading time: 3 minutes
Summarises the regulatory landscape for ESG and impact investing. Mentions various international and EU regulatory frameworks that companies must follow. Encourages regulators to further consider impact investment, so that social impact is better embedded in regulatory frameworks.
What the reviewer found helpful:“A helpful summary of the regulatory landscape for ESG and impact investing.”
Mhairi Littlewood
Intermediate
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Impact Investing Market Map
United Nations Principles for Responsible Investment
Reading time: 50 minutes
The report showcases the PRIs Market Map, which was designed to help investors identify mainstream impact and thematic investments. The SDGs and PRI reporting framework were used to identify 10 themes which are linked to the SDGs. An introduction to the Market Map and how it was designed is provided and then each theme is explored in detail in the Market Map which provides a definition of the theme, thematic and financials conditions required to identify investments aligned to the theme and KPIs that can be used to track performance of a theme.
What the reviewer found helpful:“Most helpful was the identification of sub-themes and the resulting company types that meet the definition, alongside those which would not meet the criteria ”
Chloe Mallo
Advanced
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Working with government to shape transformative policy for impact investing
Impact Investing Institute
Reading time: 5 minutes
This article considers how those trying to build the impact investing market might best engage with government and policymakers to accelerate their cause. Deep dives are offered by three organisations: The Global Steering Group for Impact Investment (GSG), The Impact Investing Institute, and FAIR (French NAB), each of whom give case studies of how they have successfully worked with governments in the past, on impact investing projects. Several communication and strategy techniques are both discussed and evidenced.
What the reviewer found helpful:“The 3 ‘key insights’ at the beginning and FAQs at the end provide accessible ways to have maximum impact on policymakers that anyone can take forward.” Anna Martinovic
Introductory