Impact Insights #21
Are you ready for the latest news in impact investing and sustainability? Let's get you updated on the essential developments in the industry.
■ New landmark GIIN research shows $1.57 trillion invested for impact
The GIIN (Global Impact Investing Network) recently released its annual flagship research, Sizing the Impact Investing Market 2024, which provides insights into developments in the impact investing industry based on survey answers of more than 1593 organizations globally. Highlights this year include a 21% annual growth rate (CAGR) of the global impact investing market over the past five years, now reaching $1.57 trillion in AUM.
Despite high growth in the impact investing market, the pace at which capital is allocated to companies and projects contributing to the SDGs remains insufficient, with a financing gap standing at an estimated $4.2 trillion annually. However, the report brings some optimism: amid growing evidence that institutional asset owners, such as pension funds, are starting to incorporate impact investments into their portfolios, GIIN CEO Amit Bouri reminds us that mobilizing even a small share of the $80 trillion they collectively manage could effectively address this gap.
■ Impact investing in private markets is bouncing back
After a slowdown in 2023, a recent report by New Private Markets shows that impact investing in private markets is bouncing back in 2024. Where capital raised for impact investing at the end of Q3 stood at $12.4 billion in 2023, it almost doubled in 2024, and now stands at $21.6 billion. Private equity strategies (including venture capital) continue to be the most popular vehicle for impact investments - though this years’ increase in private debt strategies’ fundraising activities is unusual. Impact-focused Private Real Estate funds have also increased in popularity, with $3 billion US dollars raised. Europe-focused impact funds represent the largest share of the most recent fundraising activity, with $9.9 billion raised for now in 2024, followed by North American-focused funds of $5.5 billion, and multi-regional funds of $4.8 billion. The development aligns with GIIN estimates, that the global impact investing market has surpassed key milestone of 1,5 trillion US dollars. They expect this development to continue and for the impact investing market to keep growing at a double-digit compound annual rate until 2030.
■ From coal to clean - UK's last coal plant shuts down a year ahead of schedule
On the 1st of October, The United Kingdom officially closed down its last coal-fired power plant, one year earlier than expected. The country’s pace of coal phase-out has been dramatic, with a reduction from 39% in 2012 to only 2% in 2020 - a pace that aligns closely with what’s needed to keep global warming below the 1.5 degrees Paris agreement target. The UK’s coal-generated power has to a large extent been replaced by renewables. Only 7 % of the UK’s power was generated by renewables in 2010, and in 2024 renewables’ share has passed 50 %. The rapid growth of green power has enabled the country to completely witch off coal for short periods, with the first coal-free days occurring in 2017. The Global Director, Energy of World Resources Institute said about the transition “The UK spearheaded the coal-powered industrial revolution over 250 years ago and is now demonstrating the viability of a 21st-century clean power transformation.” One important step for the country going forward will be to facilitate more flexible electricity use, as renewable energy sources are less consistent and predictable than coal.
■ Svalbard seed vault expands as climate threats escalate global food security
This October, The Svalbard Global seed vault received 30 000 new seed samples from 23 genebanks all around the world, in efforts to safeguard the world’s crop diversity. The vault already contained about 1.3 million seed samples from about 7,000 species. This new addition is the larger one-time addition since the vault opened in 2008. In 2023, over 864 million people experienced severe food insecurity, going without food for an entire day or more. Heat waves and floods are increasingly endangering food production around the world. In Japan, scientists are racing to save the country’s most popular rice, and in South Asia floods have resulted in loss of crop production and shortages of food. Not only are crops and food production threatened by extreme weather events, war, and military conflict also displace farmers and obliterate crops. This issue received increased attention after Russia’s invasion of Ukraine in 2022, as 36 of the 55 countries already experiencing a food crisis depend on crop exports from Ukraine and Russia. The Svalbard vault additions is one example of increased efforts towards climate disaster risk reduction. With temperatures continuing to rise, efforts for climate crisis preparedness has unfortunately become essential.
■ UN biodiversity conference makes progress on global fund, but key funding and monitoring gaps remain
This month, the United Nations Biodiversity Conference (COP16) was held in Cali, Colombia. Having agreed at COP15 to establish a global fund to share the benefits of genetic nature resources more fairly, delegates at COP16 agreed on further operationalization of this fund. Under the guidelines, large companies benefitting commercially from digital sequence information on genetic resources (DSI), such as companies working in pharmaceuticals, biotechnology, or animal and plant breeding, should contribute 1% of their profits or 0.1% of their revenues to the fund which aims at benefitting indigenous people and local communities. As this deal is voluntary, national governments will need to introduce the rules domestically. Despite these specifications, governments failed to reach a consensus on other key issues. One of priority was to implement a strategy for raising money for nature protection. Under COP15, countries had committed to raising $200 billion a year by 2030, including $20 billion to be given by richer countries to developing countries by 2025. With only a few months left to reach the $20 billion target, no such strategy was agreed upon. Furthermore, it remains undecided how progress to meeting the COP15 targets, will be monitored. “The pace of COP16 negotiations did not reflect the urgency of the crisis we are facing,” said Catherine Weller, director of global policy at Fauna & Flora. Another meeting will be held in Bangkok next year for the countries to continue the talks, try to resolve the outstanding issues.
