Stockholm (NordSIP) – Although the Coronavirus outbreak forced Phenix Capital to postpone its Impact Summit Europe conference at the end of March, the impact investment consultant published its 2020 Global Impact Platform Fund Report on March 31. The report surveys 487 managers and 1306 impact investment funds worth €245 billion, to identify the latest trends in the impact fund market.
A Decade of Growth
According to the report, this market segment has grown by over 65%, with as much as €160 billion worth of impact funds committed in the last decade. On the other hand, funds raised in private markets represent 71.4% of this total capital, mainly through private equity and primarily for buyouts as well as real assets and infrastructure.
Managers of the most significant products predominantly come from traditional alternative investing, even if the report recognising the rising relevance of public debt and public equity in developed markets. Developed markets account for 47% of total committed capital and continue to be a primary driver of the impact investing industry’s growth, particularly within private markets.
The focus of investment is different within developed markets, according to Phenix Capital’s CEO, Dirk Meuleman. “There is definitely a difference between the USA and Europe. Social housing is a mainstay of US impact portfolios but less so in Europe.”
Targetting the SDGs
According to the report, the top three SDGs that investors focus on are SDG 13 (Climate Action), SDG 7 (Affordable and Clean Energy) and SDG 9 (Industry, Innovation and, Infrastructure).
Given the recent rise and mainstreaming of environmental concerns, it is not surprising to find climate-related themes at the top of the impact list. Climate action has attracted €106 billion in investments from 465 funds across 211 managers, with an average fund size of €205 million. The dominant focus in SDG 13 investments has been infrastructure, which has raised 34% of the capital, including renewable and low-carbon energy production and storage assets. Another €99 billion has been committed towards Affordable and Clean Energy through 467 funds by 210 managers, with an average fund size of €210 million. Industry, Innovation and Infrastructure attracted somewhat less, 494 funds across 205 managers investing €90 billion in SDG 9.
Asides from these three SDGs, Meuleman tells NordSIP there are clearly three other emerging goals on the horizon and increasingly gathering interest. “SDG 12 (Responsible Consumption & Production), SDG 4 (Quality Education) and SDG 14 (Life Below Water) are definitively growing. SDG 14, in particular, is quite small at the moment, but there is a lot of interest in it.”
According to the CEO, the goals translate into real investment opportunities. “Renewable energy projects are a clear focus of investors in the infrastructure sector, healthcare in biotech VC and financial inclusion in microfinance.”
COVID19 to Emphasis Impact
Despite the market volatility generated by the COVID19 virus, or perhaps because of it, Meuleman is optimistic about the future of impact investing. “Personally, I believe that the current situation will provide a boost for the growing impact investing trend as it emphasises the need for a sustainable financial system. From what we see, the current market volatility is a great opportunity to show the robustness of some of the impact investment strategies. Once the current pandemic has passed, I expect impact investments to get a strong boost as more and more traditional portfolio’s get realigned and transitioned towards impact portfolio’s.”