Washington, D.C., April 8, 2019—Investors’
appetite for impact investing—in which they seek to generate positive
impact for society alongside strong financial returns—could be as much
as $26 trillion, according to a new report issued by IFC, a member of the
World Bank Group.
The report, Creating Impact: The Promise
of Impact Investing, is the most comprehensive assessment so far of
the potential global market for impact investing. As much as $268 trillion—the
financial assets held by institutions and households across the world—is
potentially available for investment. The report notes that if just 10
percent of this were channeled toward investments focused on improving
social and environmental outcomes, it would go a long way toward providing
the funding necessary to achieve the Sustainable Development Goals while
also facilitating a shift to a low-carbon future.
The growing demand for impact investing partly
reflects demographic shifts. According to Accenture, in North America alone,
at least $30 trillion in wealth will be transferred in the coming decades
from Baby Boomers to Generation X and millennials. Younger investors increasingly
favor socially and environmentally motivated investment strategies—and
they’re willing to invest larger amounts in them.
“More and more investors – including younger
people – are demanding that their investments are channeled into funds
that have positive impact for communities and the environment,” said IFC
CEO Philippe Le Houérou. “We have a historic opportunity to grow this
market -- and that’s good news for the planet and the communities around
In public markets involving stocks and bonds,
the report estimates that investor appetite could be as much as $21 trillion.
An additional $5 trillion could come from private equity, nonsovereign
debt, and venture capital. Turning this appetite into actual investments
will depend on the creation of investment opportunities and investment
vehicles that enable investors to pursue impact and financial returns in
ways that are sustainable.
IFC is the one of the oldest and the largest
impact investors—demonstrating that it’s possible to achieve significant
development impact while generating solid financial returns. On average,
IFC’s realized equity returns outperformed the MSCI Emerging Market Index
from 1988 through 2016.
Throughout its history, IFC has sought to
mobilize like-minded investors to collaborate in ways that can change the
landscape of investing. In 2003, it helped international banks establish
the Equator Principles, which have become the most tested and applied global
benchmark for sustainable project finance in emerging markets. More recently,
IFC – in close collaboration with other financial institutions - introduced
a set of Operating Principles for Impact Management—a market standard
that could help achieve the same discipline and transparency for impact
investing that the Equator Principles did for project finance.
IFC—a sister organization of the World
Bank and member of the World Bank Group—is the largest global development
institution focused on the private sector in emerging markets. We work
with more than 2,000 businesses worldwide, using our capital, expertise,
and influence to create markets and opportunities in the toughest areas
of the world. In fiscal year 2018, we delivered more than $23 billion in
long-term financing for developing countries, leveraging the power of the
private sector to end extreme poverty and boost shared prosperity. For
more information, visit www.ifc.org