In the 15 years since the Global Impact Investing Network was founded, more than a trillion dollars has been mobilized in the pursuit of financial returns derived from positive outcomes for communities and the climate. To transition the whole of the financial system to impact would require adding more than $100 trillion more.
Ambitious? Sure. But some of the world’s biggest asset managers, including insurance giants Zurich and MassMutual and pension fund managers like PGGM in the Netherlands, are signaling that they’re not just thinking of impact investing as a “carve-out” of their portfolios anymore.
“We’re seeing institutional investors starting to think about how they can set a portfolio-level impact goal, and how that cascades into decisions they make across all of their investments,” says the GIIN’s Amit Bouri.
As the GIIN prepares to kick off its annual investor forum in Amsterdam this week, ImpactAlpha’s David Bank spoke with Bouri about the dual task of convincing more investors to come under the impact umbrella, while ensuring that investors adhere to recognized and meaningful standards as their work grows.
“Part of what we’re doing is helping to shift people’s thinking,” says Bouri. “Impact investing is inevitable in terms of its maturation and momentum.”
ImpactAlpha: This year’s investor forum represents a big moment for the GIIN: it’s celebrating its 15-year anniversary. The GIIN’s original market-sizing report from JP Morgan and the Rockefeller Foundation projected impact investing could become a $1 trillion market in 10 years. Has there been as much progress as you thought there would be, or as fast as you thought?
Amit Bouri: When we founded the GIIN, no one was using the term “impact investing.” We debated whether or not to use it [because] the term had no resonance, no brand equity, if you will. We launched with just over 20 members, and we were thrilled.
If you fast forward to today, by every kind of metric for a market’s development, impact investing has been a tremendous success. We have a significant amount of capital – we’ll be publishing our latest findings on the market shortly – we have more engagement around the world, we have a much broader array of investors who are involved, we have innovation coming from all corners.
At the same time, if you zoom out and think about those big systems that motivate people to become impact investors – addressing inequality, making the planet more sustainable, protecting nature – there is a lot of work to do.
Impact investing is inevitable in terms of its maturation and the momentum it’s experiencing. We want to make sure that [we’re] framing impact investing in a way where it plays a role over the next 15 years in moving the needle on these big, systemic issues that the world is contending with.
This year’s forum is coming at an interesting time. We have a lot of uncertainty on the economic front, on climate change, and of course, this is the year of the election, so there’s a lot of political change.
ImpactAlpha: What’s the big takeaway from your biannual state of the market report that will be released at the forum?
Bouri: All signs from our research have pointed to continued growth in the market. For repeat respondents, we’ve seen growth over the last five years at a 14% compounded annual growth rate. That spans the pandemic and the economic shocks that came along with that.
Among institutional investors – pension funds and insurance companies – we are seeing engagement [around] how they can invest in a more sustainable planet and society in service of their commitment to pensioners.
One of the big themes that we’re working on with institutional asset owners is how they can apply an impact lens to their entire portfolio. Most will start with a carve out, and that’s a perfectly reasonable way to start, where they’ll set aside $500 million or several billion dollars to impact investments. But we’re also seeing some institutional investors starting to think about how they can set a portfolio-level goal, and how that cascades into decisions they make across all of their investments.
This conversation is very timely because we just published a new paper that features four different institutional investors looking at an impact lens for their work: Zurich Insurance, MassMutual, PGGM from the Netherlands, and Southern Yorkshire Pensions Authority in the UK. Four different institutions, four different countries, four different models, but thinking about how they can apply an impact lens across their entire portfolios in order to improve their beneficiaries’ lives alongside the financial returns they produce.
We’re still scratching the surface of how we can tap into individual investors and unlock their assets for impact investment. Increasingly families are thinking about the long-term, the future generations, while grappling with the realities of what’s happening in the world today.
ImpactAlpha: There has been a concerted political attack on investing using environmental, social and governance, or ESG, factors and on diversity, equity and inclusion initiatives. How has impact investing held up in this environment?
Bouri: Amid all of the political dynamics we’re encountering all over the world, what is important is to be clear about what impact investing is designed to deliver. Impact investments, by design, are targeting specific social and environmental benefits that can be very tangible for communities. The fact that impact investors are focused on things like affordable housing, creating quality jobs for marginalized populations, helping to drive more sustainable food systems, increasing access, have a broad political resonance. Most people want that for their communities.
It’s really important for impact investors to speak out about what they’re actually delivering. Impact investing, fundamentally, is about solving problems – some big, global, systemic problems, but some that are very local. This is a time in the world where we need more problem solvers, so I hope impact investors can play a constructive role.
ImpactAlpha: The forum’s agenda focuses both on “shifting minds” and “accelerating impact”…
One of the things we’ve always encountered with impact investing is this challenge of promoting something that is at odds with the ways people [in finance] have been trained. People tend to think investments are designed to do one thing: deliver profits for investors. The existence of impact investing’s holistic and integrative approach is incredibly exciting to some people, and totally mind boggling to others. Part of what we’re doing is helping to shift people’s thinking.
For rigorous investors thinking about a longer-term horizon, you really have to think about systems – how systems are evolving, and are increasingly under stress. [What is] the role that investors can play in contributing to those types of systemic shifts that are fundamental to us realizing a sustainable and just economy?
I’m excited to be interviewing Johan Rockström of the Potsdam Institute, who’s done a lot of work on planetary boundaries, at the conference. Increasingly he’s thinking about the role of investors and finance in helping keep the world within planetary boundaries. I will be followed by a conversation with Marilia Bezerra, the chief Program Officer of IKEA Foundation. I expect her to go deeper in transition food systems, which is important to addressing climate change and social inequities.
ImpactAlpha: What big themes are you hoping to see the field engage on more deeply, both at the forum and after?
I hope that we can help inspire more activity in the blended finance area. We found that blended finance sales dipped during the pandemic, but they’re now beginning to recover. We have had some big announcements and interesting blended finance deals recently. The SDG Loan Fund is an example. As a market, we need to work on making it more scalable and replicable. As a network, I hope we can disseminate learnings.
Also, investors are getting bombarded with opportunities around climate. One dimension that cannot get lost is anchoring climate solutions to what’s actually needed from a 1.5-degree Celsius scenario. There’s been a gap in translating [scientific] evidence into language that an investment allocator would use to understand the landscape. If you’re an investor getting bombarded with opportunities in, say, regenerative agriculture in California, mangroves in Indonesia, a wind farm in the UK, electric scooters in Latin America, how do you make sense of which of these things is going to move the needle?
We’re embarking on an entire initiative and we’ll be publishing a framework to help investors understand the landscape in the context of scientific significance. Our hope is that it will really broaden the aperture for investors to think about a holistic approach to climate solutions. The GIIN will be doing more programming following the forum to help mobilize more capital to an array of climate solutions.
