Impact investing is attracting more and more capital

Why is impact finance a constantly growing trend?

When it comes to impact investing or impact finance, refers to all those investments in companies, especially in innovative startups, organizations, funds and instruments which, in addition to a financial return, generate a positive and measurable environmental or social impact. An area experiencing strong growth, whose invested resources exceeded one billion euros in 2022, despite a global macroeconomic context characterized by extreme uncertainty and volatility. Therefore, more and more investors in Italy and around the world are attracted to impact investing and the trend is expected to expand further in the coming years. According to a study by Vontobel, a globally active Swiss financial management company, 7 out of 10 investors intend to increase their allocations to impact finance in the next three years. A trend also accelerated by the implementation of the sustainable development goals of the United Nations 2030 Agenda. Numbers that say a lot about the turn towards increasingly sustainable but also long-lasting financial investments. The report just mentioned, in fact, underlines that today investors are more likely to expose themselves to sectors that guarantee greater resilience and long-term prospects, whose activity is linked for example to structural changes, such as technological innovation and which go beyond short-term cyclical macroeconomic trends. In this sense, investors are determined to bet on concrete and measurable sustainable strategies, better aligned with their objectives and values, while at the same time denying the superficial environmentalism expressed by phenomena such as greenwashing.

One of the main issues to untangle in impact investing is represented by the objective difficulty in adequately measuring the non-financial performance of an investment or its impact in terms of environmental and social sustainability. A difficulty mainly connected to the scarcity of quality data on the ESG activities of the companies or funds in which one has invested and also to the fact that the measurement and reporting methodologies and standards are relatively recent and therefore constantly evolving.

Growth prospects

According to Vontobel research, globally, 81% of impact investing is driven by the goal of decarbonisationOf transition to Net-Zero for 77% and of protection of biodiversity for 56%. Going into detail into the different areas of the world, the main share of investors in impact finance is found in European countries (70%), followed by Asia-Pacific (57%) and North America (56%). Speaking of investment classes, in the next three years the largest allocations are expected to be 51% in infrastructure, 38% in real estate, 23% in raw materials.

Finally, at the level of the most relevant ESG factors in guiding strategies, North American and Asian investors invest more in funds and organizations engaged in social sustainability issues, with 63% and 66% respectively, while European investors to a lesser extent (53% ).