Stockholm (NordSIP) – According to the latest report on impact investing, the State of the Market 2024, the Global Impact Investing Network (GIIN) reports that impact investors, as measured by the size of their assets under management, continue to enjoy steady growth. Nevertheless, it appears that fragmentation, both in the experiences of large and small investors and in terms of the impact frameworks available, was a dominant concern for impact investors.
“Impact investors have demonstrated resilience and innovation during 2024. They have increased their focus on climate adaptation and resilience, developed new and innovative investment vehicles, and fostered vibrant discussions around equity in the industry. As the impact investing sector grows, so does its capacity to tackle global challenges head-on,” says Dean Hand, chief research officer for the GIIN.
The report is part of the GIIN’s 2024 Market Intelligence Series, based on the 2024 Impact Investor Survey. It captures reliable data from 305 organizations across 39 countries.
Large V. Small Investors
According to the report, asset allocated to impact investing strategies have continued to grow, delivering a compound annual growth rate (CAGR) of 14% over the past five years. “The dynamics between large and small investors are particularly intriguing, suggesting that investors are increasingly playing to their strengths — a sign of a maturing market.”
Among other things, more small investors than their larger counterparts cited regulatory challenges and local political developments as significantly affecting their impact investing strategies. Meanwhile, large investors perceived the development of artificial intelligence as affecting their impact as compared to small investors.
Increased Fragmentation
Impact investors highlighted three main challenges: fragmentation among impact frameworks, difficulties in comparing impact results to peers and verifying impact data received from investees. The increased fragmentation reported by investors is part if a trend that is in keeping with past observations and, this year, is likely influenced by evolving regulatory environments.
Despite this fragmentation, “over two-thirds of investors are incorporating impact criteria into their investment governance documents, signaling a significant shift towards formalizing impact considerations in decision-making processes. Additionally, there is a growing trend among investors to subject their impact management processes to third-party verification.”
The GIIN argues that these developments are crucial for enhancing investor accountability and indicate a move towards more sophisticated measurement and management practices in impact investing.
Does Performance Not Matter?
The report also notes that, paradoxically, investors seem to be reporting a high level of satisfaction with financial performance, even when targets are not met. The report argues that this disconnect seemingly “underscores the need to enhance data-sharing practices to better understand actual impact performance results. The GIIN’s impact performance benchmarks represent an important step in this direction, but there is much more work to be done.”
The GIIN Agriculture, Energy and Financial Inclusion Benchmarks are analytic tools designed to assist impact investors make informed impact investment decisions by helping them gauge the impact performance of their investments relative to the market, peer groups and against the scale of the social and/or environmental challenge.