How Much Money Is Invested With Impact?

Illustration: DALL-E/OpenAI

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You might have wondered:

How Much Money …. Is Invested According To Impact Principles?

Getting even a loose estimate to answer that question would require knowing a few variables:

Global AUM

Global assets under management (AUM) is a metric which attempts to quantify the value of professionally-managed assets throughout the world across all asset classes and countries. Arguably, it’s the widest financial metric that can be calculated.

What Qualifies As ‘Impact’?

Quantifying the size of impact globally requires making some determinations as to what constitutes impact investment, what doesn’t, and what are credible sources.

Some Datapoints To Help Give A Ballpark

Datapoints:

According to a 2022 market sizing estimate, impact investing was worth $1.164TN globally.

Sir Ronald Cohen has offered $2.5TN as a figure that combines the GIIN estimate with the remarkable issuance levels that have been seen in sustainability-linked bonds and loans.

Boston Consulting Group (BCG) has estimated global AUM (across all asset classes) to be in the region of $120TN.

Plotted To Scale:

For the purpose of this analysis, we chose to call Sir Ronald’s benchmark the “high” estimate and the GIIN’s the “low” or “conservative” metric. We took these datapoints together with the global AUM number from BCG.

It should be emphasised: estimates as to all these variables vary considerably. But they still tend to be within a certain range. These benchmarks accord with those broad ranges.

Impact Accounts For <5% Of Global AUM

Calculations

Using the latter estimate, impact would account for 2.08% of professionally-managed assets.

Using the more conservative figure from GIIN, it would account for 0.97%.

0.08%
Highest Est (2023)
0.97%
Lower Est (2022)

AUM By Approach (Impact vs. All Investment Approaches)

Whichever yardstick you prefer to measure by, the bottom line remains the same:

– While impact has taken huge strides to stretch beyond the $1TN AUM milestone lots of work (and scaling up) needs to be done.

– The vast majority of professionally managed funds are not invested according to impact principles.

How Big Is Impact … Compared To ESG?

The short answer to the question: “is more money invested according to ESG principles or impact?” is “currently, ESG.”

The answer to “by how much?” is “about 10 to 30 times – and when looking at global AUM estimates, a good degree of scepticism is probably well-advised.

Quantifying assets under management (AUM) on a global basis is extremely challenging and likely highly imprecise. Even when estimating AUM on a local (or national) level, a huge amount hitches upon the surveyor’s definition of what constitutes a “sustainable” investment – a measure which varies widely between practitioners.

But to with those caveats borne in mind, some global estimates were source and are included below.

The third column divides the estimates by the “high” impact AUM estimate of $2.5TN while the next column divides it by the “low” impact AUM estimate of $1.164TN (GIIN, 2022).

ESG Is 10-30X The Size Of Impact According To Estimates

Year Global ESG AUM Est ($TN) Ratio To High Impact AUM Est Ratio To Low Impact AUM Est Source wdt_id wdt_created_by wdt_created_at wdt_last_edited_by wdt_last_edited_at
2023 30.3 12.1 26.0 Global Sustainable Investment Review 1 daniel 17/06/2024 09:22 PM daniel 17/06/2024 09:22 PM
2022 30.0 12.0 25.8 Global Sustainable Investment Review 2 daniel 17/06/2024 09:22 PM daniel 17/06/2024 09:22 PM
2021 18.4 7.4 15.8 PWC Asset and Wealth Management Report 3 daniel 17/06/2024 09:22 PM daniel 17/06/2024 09:22 PM
2020 35.3 14.1 30.3 ESG Investor citing Global Sustainable Investment Review data 4 daniel 17/06/2024 09:22 PM daniel 17/06/2024 09:22 PM
2019 31.0 12.4 26.6 US SIF Foundation’s Report on US Sustainable, Responsible and Impact Investing Trends. 5 daniel 17/06/2024 09:22 PM daniel 17/06/2024 09:22 PM
2018 30.7 12.3 26.4 Global Sustainable Investment Review 6 daniel 17/06/2024 09:22 PM daniel 17/06/2024 09:22 PM
Year Global ESG AUM Est ($TN) Source

Impact Vs. ESG AUM Estimates – Plot Over Time

Here’s an animated time plot created with Flourish Studio that shows how the estimated ratio of global ESG AUM to global impact AUM has shifted over time.

This chart uses the same (static) impact estimate for both plots (and hence the trajectories are basically parallel).

Last Updated: 16/06/2024

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