Impact investing... still growing despite naysayers

Despite the Trump administration’s attacks on renewable energy and company commitments to ESG, impact investment continues to grow globally with the Global Impact Investment Network (GIIN) now estimating the size of the worldwide impact investing market at USD $1.571 trillion, the first time it has topped the USD $1.5 trillion mark.

Advocates of impact investing say funds using environmental, social and governance (ESG) and impact metrics have a competitive edge as climate change risks and widening social inequality grow and urgent solution to address them increase worldwide. The GIIN global market figure of USD $1.571 trillion, the central finding of the GIIN’s “Sizing the Impact Investing Market 2024” report, reflects an increasingly comprehensive measurement of impact assets under management globally. According to a recent Bloomberg report, Japan’s $1.7 trillion Government Pension Investment Fund is the latest major financial institution considering the approach.

The term “impact investing” was coined at a meeting of the Rockefeller Foundation in 2007. The strategy has grown steadily, and in the first quarter of 2024, roughly $1.6 trillion of assets were being managed worldwide using the approach and that amount is growing.

As global investors search for both financial returns and meaningful social and environmental change, impact investing has surged—offering a more deliberate approach than an ESG framework. As most Ethinvest clients know, while ESG strategies typically assess companies’ risk profiles and sustainability practices, impact investing goes further: investors actively invest capital into ventures whose core purpose is to generate measurable positive outcomes as well as financial performance.

Impact investing’s defining feature is intentionality and additionality. Investments are designed from the outset to address specific issues such as climate change, housing and health and are ventures that would not happen in a “business-as-usual” environment without impact capital.

Measurement of outcomes is another key impact investment distinction. ESG company Lythoue says that impact investors expect reporting on actual change—how many people gained access to clean water, how many tonnes of CO₂ were reduced, how many affordable homes were provided—often with rigorous frameworks and long-term tracking. ESG investing, while increasingly incorporating disclosures, tends to focus on corporate disclosures and risk management rather than direct impact.

In recent years, the divide has also been amplified by performance expectations and investor motivation. Some financial commentators suggest that while ESG funds appeal to broad risk-averse investors looking for “better” companies, impact investing is more targeted—often involving longer horizons and accepting that real change may require trade-offs or patience.

Ultimately, whether an investor selects ESG, impact or a hybrid approach depends on their individual objectives, timeframe and risk tolerance. All investment recommendations provided by Ethinvest are carefully screened to avoid harm, benefit people and the planet, and contribute to solutions, with a variety of options available to meet our clients’ individual needs and ethical preferences.

Contact your adviser, or submit an enquiry here to discuss impact investing opportunities with Ethinvest in further detail.