The Size of Impact

The Size of Impact is an insightful report published by Impact Europe, authored by Gaggiotti, Gianoncelli, and Venturato. It presents a comprehensive analysis of the European impact investing market, focusing particularly on the implications for sustainable housing and other social and environmental challenges.

The report estimates that the European private impact investing market, which includes direct and indirect investments in unlisted assets, is valued at €190 billion, representing 2.5% of the total assets under management (AUM) of €7.6 trillion eligible for impact investing in Europe. In addition, the public impact investing market is estimated at €40 billion.

Notably, the private impact investing market has experienced significant growth, with investments in unlisted assets increasing from €80 billion to €190 billion over the past two years. This doubling in size is attributed to enhanced collaboration among various stakeholders, reflecting a growing recognition of impact investing as a viable solution to address social and environmental issues.

The report highlights the importance of investor additionality, which refers to the positive contributions made by investments that would not have occurred without them. This year, 62% of capital invested in unlisted assets demonstrated some form of investor additionality, up from 48% in the previous report, indicating a shift towards more impactful investments. 🇪🇺 Leading Countries in Impact Investing The impact investing market in Europe is predominantly led by the United Kingdom, the Netherlands, and France, which collectively hold substantial shares of AUM. These countries benefit from established ecosystems, robust regulatory frameworks, and active investor participation. Other countries, such as Italy, Denmark, Belgium, and Spain, are also making notable contributions, while emerging markets like Türkiye, Portugal, and Greece show promising growth potential.

Venture capital and private equity (VC/PE) managers dominate the impact investing landscape, representing 44.8% of the investors surveyed and managing 39.1% of direct AUM in unlisted assets. This underscores the alignment between these investment forms and the objectives of impact investing.

Private equity emerges as the leading asset class for impact investors in unlisted markets, reflecting its adaptability for high-impact projects needing long-term investment horizons. Private debt is also significant, demonstrating the sector’s reliance on diverse financial structures to achieve various impact goals.

Institutional investors, including pension funds and insurance companies, now account for 28% of total capital available to impact investors, becoming primary contributors in private, unlisted markets. Banking institutions represent another major source, providing 22% of funding.

The study reveals that 45% of European impact capital flows outside Europe, with a notable focus on Africa (18%), followed by Asia (12%) and Latin America (8%). This shift indicates an evolving geographic distribution of impact investments, with northern European countries leading in global capital flows.

Impact investors are increasingly targeting social and environmental goals, with the most common SDGs being Decent Work and Economic Growth (62%), Reduced Inequality (55%), and Climate Action (46%). This highlights the role of impact investing in addressing pressing social challenges and advancing sustainable housing initiatives.

The report indicates that 88% of organizations involved in impact investing are measuring their impact, demonstrating a commitment to integrating impact considerations into their strategies. This upward trend in impact management is crucial for ensuring that investments contribute effectively to social and environmental goals.