The Size of Impact

The report titled "The Size of Impact" is published by Impact Europe, which coordinates the European Impact Investing Consortium. The authors, Alessia Gianoncelli, Gianluca Gaggiotti, Alessio Venturato, and Raffaella De Felice, aim to provide insights into the state of the European impact investing market. Their focus is on understanding how impact investing can be leveraged to address social and environmental challenges, including those related to sustainable housing.

The report estimates the European private impact investing market, which includes both direct and indirect investments in unlisted assets, at €190 billion. This represents 2.5% of the total assets under management (AUM) in Europe, which is €7.6 trillion. The public impact investing market is also significant, estimated at €40 billion, highlighting the distinct operational processes and goals between public and private markets.

Notably, the private impact investing market has seen remarkable growth, doubling from €80 billion to €190 billion over the past two years. This growth indicates a stronger commitment to using impact investing as a tool to tackle pressing social and environmental issues, including sustainable housing solutions. The report cites that only 17% of the Sustainable Development Goals (SDGs) are on track to be achieved, underscoring the necessity for accelerated investment in this area.

The report identifies investor additionality as a key contributor to positive change, with 62% of capital invested in unlisted assets demonstrating this quality. This indicates that a significant portion of investments would not have occurred without the involvement of impact investors, which is critical for funding innovative housing projects that address social needs.

When comparing impact investing across European nations, the United Kingdom, the Netherlands, and France lead the market in AUM. These countries have established strong impact investing ecosystems, supported by favorable regulations and active investor engagement. Countries like Italy, Denmark, and Belgium are also making strides, while Türkiye, Portugal, and Greece are emerging markets with potential for growth.

Venture capital and private equity (VC/PE) fund managers dominate the impact investing landscape, accounting for 44.8% of the investors and holding 39.1% of direct AUM in unlisted assets. This alignment positions them as pivotal players in driving investments towards sustainable housing and other impactful sectors.

Institutional investors, including pension funds and insurance companies, are now the primary contributors to impact investments, representing 28% of total capital. Banking institutions follow closely behind, providing 22% of funding. The trend points towards an increasing recognition of the importance of aligning capital with social and environmental goals.

The report reveals that 45% of European impact capital flows outside of Europe, with a significant portion directed towards Africa (18%), Asia (12%), and Latin America (8%). This global approach signifies the interconnectedness of impact investing and the necessity for collaborative efforts to address housing and other critical issues on a broader scale.

Impact investors are increasingly targeting social and environmental goals, with the top SDGs being Decent Work and Economic Growth (62%), Reduced Inequality (55%), and Climate Action (46%). This demonstrates the potential for impact investing to contribute significantly to sustainable housing and community development, aligning financial returns with positive societal outcomes.

The report highlights that 88% of organizations engaged in impact investing are measuring and managing their impact effectively, an increase from previous years. This emphasis on impact measurement is crucial for ensuring that investments not only yield financial returns but also contribute to meaningful change in areas such as sustainable housing.