What Is Impact Investing
Can you make money while also creating positive change in the world? Impact investing pursues those two things 'at the same time, and measurably.'
What Impact Investing Is
Impact investing is investing that aims to intentionally generate positive and 'measurable' social and environmental impact alongside financial returns.
The international body GIIN cites three core elements of impact investing: 1. intentionality (intending a positive effect), 2. measurement (actually measuring that effect), and 3. financial return (pursuing a return as well).
What sets it apart from 'donating' is that it does not give up financial returns, and what sets it apart from ordinary ESG investing is that it tries to measure impact concretely.
How Big the Market Is
Impact investing has grown beyond a niche into a substantial market.
According to GIIN's 2024 market-sizing report (as of end-2023), about 3,907 organizations worldwide manage roughly $1.571 trillion in impact investing assets.
From end-2018 to end-2023, both assets and the number of organizations grew about threefold, with an estimated five-year compound annual growth rate (CAGR) of about 21%.
Source: GIIN 'Sizing the Impact Investing Market 2024' (about $1.571 trillion, about 3,907 organizations, five-year CAGR about 21%). Market size can vary by sample and definition.
Cautions
Impact investing has a clear purpose, but a few things bear keeping in mind.
1. There is no unified standard for measuring 'impact,' so there is debate over what counts as an outcome. 2. Not giving up financial returns does not mean there is no risk of loss. Impact investing carries market volatility and the risk of losing principal just the same. 3. Like greenwashing, there is a noted risk of 'impact washing' that exaggerates impact.
It is important to distinguish that good intentions and actual outcomes and returns are separate.
This article does not recommend any specific impact fund or product. Its purpose is to explain the concept and the state of the market.
よくある質問
Q. How is impact investing different from donating?
Donating does not expect a financial return, whereas impact investing pursues a financial return alongside social and environmental outcomes. Aiming for both at once is the key point.
Q. Do impact investments have low returns?
Not necessarily. In GIIN surveys, a majority reported meeting or exceeding their financial and impact goals, but that does not mean there is no risk of loss.
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