Context and Overview
The report "The Size of Impact" was prepared by the European Impact Investing Consortium, which includes various stakeholders in the impact investing landscape, such as Impact Europe and GSG Impact. This publication aims to provide insights into the European impact investing market, particularly focusing on the sizing and dynamics of the sector, which is increasingly recognized as a solution for addressing social and environmental challenges, including those related to sustainable housing.
Market Size and Growth
The European private impact investing market is estimated at €190 billion, representing 2.5% of the total assets under management (AUM) in Europe, which amounts to €7.6 trillion. This growth reflects a doubling of investments in unlisted assets from €80 billion over the past two years, showcasing a significant increase in the commitment to impact investing. The public impact investing market is separately estimated at €40 billion.
Investment Trends and Impact
The report highlights that the private impact investing market has seen substantial growth, particularly in direct investments, which have increased by 20% between 2022 and 2023. Despite this progress, the report indicates that only about 17% of the Sustainable Development Goals (SDGs) are currently on track to be achieved, necessitating enhanced efforts in impact investing to foster innovative solutions at scale.
Leading Countries in Impact Investing
The UK, Netherlands, and France lead the European impact investing market, benefitting from established ecosystems characterized by supportive regulatory frameworks and active investor communities. Emerging markets such as Türkiye, Portugal, and Greece show promise for future growth, indicating a potential expansion of sustainable housing investments across Europe.
Key Players and Asset Classes
Venture capital and private equity fund managers dominate the impact investing landscape, representing 44.8% of the investors and holding 39.1% of direct AUM in unlisted assets. Private equity has emerged as the leading asset class, aligning well with long-term investments necessary for impactful housing projects. Additionally, private debt plays a significant role, underlining the sector's reliance on diverse financing structures.
Sources of Funding
Institutional investors, including pension funds and insurance companies, contribute 28% of the total capital available for impact investments, marking them as the primary funding sources. Banking institutions also play a crucial role, providing 22% of the capital for investments targeting social and environmental solutions.
Capital Flow Patterns
Interestingly, 45% of capital from European impact investors flows outside of Europe, with a notable shift towards Africa (18%), Asia (12%), and Latin America (8%). This trend indicates a growing interest in addressing global challenges through impact investments.
SDG Contributions
The report identifies key SDGs targeted by impact investors, with Decent Work and Economic Growth (62%), Reduced Inequality (55%), and Climate Action (46%) as the most prevalent goals. This indicates a strong alignment of impact investments with the objectives of fostering sustainable housing and social equity.
Impact Measurement Standards
All organizations involved in the study are measuring their impact, with 88% reporting effective impact management practices. This trend towards enhanced measurement and management of impact is crucial for ensuring that investments yield meaningful social and environmental outcomes.
In conclusion, the report underscores the importance of impact investing in the European context, highlighting significant growth, leading markets, key players, and the critical role of sustainable housing in addressing pressing social and environmental challenges.