GIIN looks to define growing impact investing market

WASHINGTON — Investors, market watchers, and development experts have collectively wondered about the size of the impact investing market — along with how to define the field. The Global Impact Investing Network released a pair of documents this week to answer those questions.

Today, there are about $502 billion in impact investments around the world, managed by more than 1,340 organizations, according to the GIIN’s “Sizing the Impact Investing Market” report that was released Monday. Development finance institutions manage just over a quarter of the total industry assets, according to the report.

While many impacting investing organizations manage small amounts of money — half manage less than $29 million — a few players manage upward of $1 billion, the report said.

At $502 billion, the report’s estimate of the market is the largest to date, but it comes with a few caveats. It was developed by looking at self-reported numbers from impact investing firms where available and used that information to determine estimates for firms where data wasn’t available.

GIIN defined the market size in part to “inspire confidence” because it “allows comparisons of analogous markets” and creates an opportunity to track market growth over time, Sapna Shah, GIIN’s director of strategy, told Devex.

“We need more investors, we need more variety of capital — concessionary and big commercial,” she said. “We’re excited, but we think there needs to be a bit more coherence and definition around this market.”

On Wednesday, GIIN is releasing what it calls a new set of core characteristics that define an impact investment, which Shah calls a “more rigorous, emboldened definition.”

Shah added that having more clarity about what the industry is and what it is not is needed by the market and to attract new investors.

The core characteristics are intentionality, meaning the purpose of investments must be impact; the use of evidence and impact data in investment design; that they manage impact performance; and that they contribute to the growth of the impact investing market.

As the impact investing industry has grown and attention increased from mainstream commercial asset managers, there have been growing concerns about “impact washing,” the idea that nonimpact investments could be labeled incorrectly.

GIIN’s work is not done in direct response to any specific situations, but is aimed at helping the market grow credibly, Shah said. This new definition can help distinguish impact investing from environmental social governance, or socially responsible investing, she said.  

The characteristics were launched after a public comment period and consultation with impact investors, and are part of a set of efforts by GIIN to continue to help define and build the market. In May, GIIN will be launching IRIS+, a new system for impact measurement and implementation with metrics that it has found “actually matter” and have a “material impact” and guidance on how to use metrics to collect information, Shah said.

“We want to see that this growth is credible and stays true to an impact intention,” she said. “We are focused on giving clearer guidance on how to maintain the integrity of activities.”