Impact investing describes investments that are measured according to the positive environmental and social impacts they deliver, as well as their financial returns. According to Joe Dharampal-Hornby, public affairs manager at the non-profit Impact Investing Institute, the practice is growing at a staggering rate as ESG moves beyond vague notions of ethical investment and into targeted funding with measurable impacts.
“Globally, we’ve seen the impact investment market grow exponentially over the last five years; it’s now worth more than $2tn,” he says, with potential to expand to more than 10 times this level in less than a decade.
Impact investing isn’t just about being nice or having noble intentions, says Shami Nissan, head of responsible investment at Actis, a global emerging markets investment fund. Long-term investors have a financial responsibility to consider the environmental and social implications of their investments.
“These are matters of global urgency that impact everything. Investors who have a long-term investment horizon, such as public pension plans and sovereign wealth funds, wouldn’t be fulfilling their fiduciary responsibility if they didn’t think about the risks of climate change, for example.”
The expectations of asset owners and beneficiaries have also evolved to prioritise environmental and social impact, she notes. “We’ve seen a real sea change in what the client wants their money to achieve. Of course, they want returns, but they want impact alongside that,” Nissan says.
Author: Sam Haddad