People are investing more money than ever with a socially responsible mindset. Is this a generational shift?

by Insigniam Read more from the Change When Already Winning issue

Investing with a socially responsible mindset is going mainstream. The practice is growing remarkably fast: According to the Global Impact Investing Network (GIIN), the value of impact investing assets under management across the world roughly doubled from 2017 to 2018, and the pace of growth is not expected to subside soon. Impact investing comprises a $1.3 trillion market, the Financial Times reported in September.

Why the sudden surge? One factor might be the millennial generation, which is socially minded and now beginning to invest money. Growing skepticism of the traditional nonprofit charity model of aid might be another cause. Books such as Dambisa Moyo’s Dead Aid and reports by academics have suggested that this model does not create economic growth.

To meet demand, more and more investors are entering the impact space, GIIN’s latest report says. But they still face challenges to growing the industry, such as a lack of appropriate capital across the risk/return spectrum, particularly outside the United States. There is also the risk that as impact investing grows, its meaning will be diluted. Some investment organizations are worried about “impact washing,” whereby an organization masks unpopular practices by investing in noble causes.

“We are very concerned about impact washing,” Mark Haefele, global chief investment officer of UBS Wealth Management, told the Financial Times in September.

In October, the World Bank’s International Finance Corporation (IFC) unveiled a definition of impact investing to head off confusion. “There have been shifting definitions. There is a certain degree of confusion,” said IFC Vice President Hans Peter Lankes. “Asset owners have been asking for clarity.”

Follow the Money

According to the Global Impact Investing Network’s 2018 report, these are the top areas of investment for impact funds, in terms of assets under management.

19% Financial services (excluding microfinance)

14% Energy

9% Microfinance

8% Housing

6% Food and agriculture


Insigniam

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