3.1 Harnessing the Hype
3.1 Harnessing the Hype
Since the term was firm coined in 2007, many leading proponents of impact investing have estimated the potential size of the sector. In 2009, the Monitor Institute estimated that the impact investment market could potentially reach US$ 500 billion by 2020 (or 1% of total managed assets, estimated at US$ 50 trillion).16 In 2010, JP Morgan and Rockefeller Foundation sized the bottom-of-the-pyramid market opportunity across five sectors and estimated that the impact investment sector could reach US$ 400 billion to US$ 1 trillion by 202017. And in 2012, the Calvert Foundation formed an estimate through a representative survey of investment managers, applying prospective adoption rates to a global investment management industry of US$ 26 trillion, and reached a market potential of US$ 650 billion.18
At a present conservative market size of approximately US$ 25 billion,19 the impact investment sector will need to grow by approximately 53% annually to reach US$ 500 billion or 69% annually to reach US$ 1 trillion by the year 2020 – a potentially difficult feat given that the sustainable investing market in the United States grew by 11% per year since 1995 (see Figure 5).20
Although sustainable investing is not the same as impact investing and the growth dynamics could be very different, few sectors have sustained growth rates above 50% per year.21 In order for the impact investment sector to realize its potential, mainstream asset owners and asset managers will need to begin to allocate a portion of their portfolios to the sector.
There seems to be powerful but latent demand among retail investors for impact investments. But many investors are waiting for their clients to ask for it. My guess is if you build it, they will come.
Elizabeth Littlefield, President and Chief Executive Officer,
Overseas Private Investment Corporation (OPIC), USA
Along with aggressive growth expectations, interest in socially conscious investment strategies is indeed growing. The US SIF Foundation’s 2012 Report on Sustainable and Responsible Investing Trends revealed that client demand is the number one reason why more money managers are incorporating ESG criteria into their investments (see Figure 6). According to the same report, 11.3% of assets under management in the US were engaged in sustainable and responsible investing practices in 2012.22 Similarly, the United Nations Principles for Responsible Investment (UNPRI) initiative reports that its signatories hold approximately 15% of the world’s investable assets.23 Although as Section 2.2 described, sustainable investing and responsible investing are not the same as impact investing, trends in these markets can provide indications of the potential trends for impact investing.
Source: US SIF Foundation’s 2012 Report on Sustainable and Responsible Investing Trends
Source: US SIF 2012 Trends Report, n = 129