While global investment is expected to fall sharply this year as a result of the Coronavirus pandemic, impact investment – the funding of projects that generate a positive social or environmental impact, as well as a financial return – is tipped to hold relatively steady, and could play a key role in the recovery of emerging market economies.
According to a survey of 294 impact investors conducted between March and April, a majority (57 percent) of respondents said they would maintain their 2020 investment plans, with some (16 percent) even indicating they would bump up investments. This is according to a study by New York-based Global Impact Investing Network (GIIN), which found that only a fifth of impact investors were planning investment cuts, while seven percent were uncertain.
Impact investing has been gaining traction, channeling the flow of funds into projects proven to have a transformative power in the society – providing solutions to crises and helping mitigate climate change.
The ensuing global economic slowdown caused by coronavirus is seen to offer fresh momentum for impact investors to direct their capital towards a better recovery and a more sustainable and inclusive world.
Estimates indicate the impact investment market stood at $502 billion last year, equivalent to the size of the economies of Nigeria and Ghana combined.
For long, traditional investors tended to show hesitance in investing in poor regions and low-profit sectors, opening investment and infrastructure gaps where they are needed most. Impact investors, however, are taking a different approach, demonstrating intent to contribute to the improvement of measurable social and environmental outcomes. Their goal, besides returns, is to generate socio-economic value and impact.
Impact investors seek to solve challenging social and environmental problems through deployment of private capital. They are also moving to invest in areas identified in the UN’s Sustainable Development Goals (SDGs).
The investment needs required to meet the SDGs are tremendous. Estimates indicate that meeting the SDGs in just five key areas (education, health, roads, electricity, and water and sanitation) will require additional annual spending of $500 billion in low-income developing countries, and $2.1 trillion in emerging market economies by 2030.