The Evolution of Impact Investing: Key Insights for 2018 and Beyond
In 2018, the landscape of impact investing underwent significant transformation. This article will delve into the key factors that shaped the impact investment landscape in 2018, the influence of the United Nations Sustainable Development Goals (SDGs), and the evolving roles of various stakeholders including foundations, financial institutions, and the general investment community.
1. The Rise of Impact Investing in 2018
One of the most notable trends in 2018 was the substantial increase in the amount of capital allocated to impact investing. According to research from EightySixty Fund, this surge in investment dollars showcases a growing recognition of the value and potential of aligning financial returns with social and environmental impact.
The term 'impact investing' gained wider recognition and acceptance, transcending its earlier niche nature within the investment industry. Various sectors, from technology to agriculture, saw a heightened interest in impact-driven investments, fostering a more inclusive and comprehensive approach to addressing global challenges.
2. The UN Sustainable Development Goals as a Framework
The United Nations Sustainable Development Goals (SDGs) have emerged as a crucial reference point for describing and measuring impact. The SDGs, adopted in 2015, provide a comprehensive framework for achieving sustainable development by 2030. In 2018, the SDGs gained significant traction within the impact investing community, serving as a guiding light for investment strategies and impact measurement.
Investors increasingly adopt the SDGs as a common language to articulate their impact objectives. This standardized approach facilitates greater alignment among stakeholders and enhances transparency and accountability in impact reporting. The UN’s official SDG website provides a platform for organizations to track their progress and share best practices, thereby strengthening the impact investing ecosystem.
3. Foundations Making Tangible Impact
Traditionally known for grants, many foundations began to incorporate impact investing into their portfolios in 2018. This shift reflects a broader recognition of the role foundations can play in driving both financial and social returns. For instance, the Foundation Center highlighted several examples of successful philanthropic impact investing strategies.
The adoption of impact investing by foundations has several advantages. Firstly, it leverages their existing expertise in social and environmental issues, allowing for more targeted and effective investments. Secondly, it aligns their long-term strategic objectives with their missions, fostering a more integrated and sustainable approach to philanthropy. Lastly, it expands the financial resources available for impactful projects, enhancing the potential for meaningful social and environmental change.
4. Wall Street’s Shift Towards Impactful Practices
Major financial institutions, such as BlackRock and Goldman Sachs, played a pivotal role in the evolution of impact investing in 2018. These organizations have long been influential players in the financial markets, and their support significantly boosted the credibility and acceptability of impact investing within broader investment communities.
BlackRock, one of the world's largest asset managers, declared its commitment to integrating environmental, social, and governance (ESG) considerations into its investment decisions. According to a 2018 report, ESG criteria are now integral to BlackRock's investment process, reflecting a more comprehensive risk management strategy. Similar initiatives at Goldman Sachs, such as the launch of the Impact Investing Team, demonstrate a proactive approach to integrating impact considerations into financial services.
These moves by leading financial institutions further validate the potential of impact investing as a legitimate and attractive asset class. Moreover, they set a precedent for other financial institutions to follow, contributing to the growing acceptance and integration of impact investing principles across the industry.
5. The Future Outlook for Impact Investing
The trends observed in 2018 signal a promising trajectory for impact investing. As more stakeholders, including foundations and financial institutions, embrace impact investing, the sector is likely to experience continued growth and evolution. The SDGs will remain a key driver, providing a standardized and comprehensive framework for impact measurement and reporting.
Financial institutions will increasingly adopt ESG criteria as part of their investment strategies, enhancing the alignment between financial returns and social impact. Furthermore, innovations in impact investing, such as social impact bonds and blended financing models, will further diversify the sector and cater to a broader spectrum of social and environmental challenges.
Given the growing awareness and commitment to sustainability, impact investing is poised to play an increasingly critical role in achieving the UN's Sustainable Development Goals by 2030. As stakeholders continue to refine and expand their impact investing practices, the sector is likely to become a more robust and reliable means of creating positive change.
Conclusion
The landscape of impact investing in 2018 saw substantial advancements, driven by the increasing recognition and acceptance of the UN Sustainable Development Goals, the active involvement of foundations, and the pioneering efforts of financial institutions. As the sector continues to evolve, it holds the potential to drive meaningful social and environmental change while delivering attractive financial returns. With ongoing innovation and stakeholder engagement, impact investing is well-positioned to make a significant contribution to achieving the global goals for sustainable development.