The International Finance Corporation (IFC), a sister organization of the World Bank, has estimated that up to $26tn could be available for impact investing.
In the new report, Creating Impact: The Promise of Impact Investing, there are as much as $268 trillion financial assets held by institutions and households across the world, that are potentially available for investment. The report notes that if just 10 percent of this were channelled toward investments focused on improving social and environmental outcomes, the funds can provide necessary funding to achieve the Sustainable Development Goals while also facilitating a shift to a low-carbon future.
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.
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 the world.”
Throughout its history, IFC has sought to mobilize like-minded investors to collaborate in ways that can change the landscape of investing. 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.