Impact Insights #12

Welcome back to the ESGI Horizon Newsletter! Today, we’ll dive into the win-win investing paper, investigating how investors perceive and act on impact risk. Then we’ll look at some News & Trends, among others the new SBTI stance on carbon credits, the WMO 2024 report and operations against illegal mining in Brazil. We’ll finish it up with the latest impact deals :)

Who Loses in Win-Win Investing? A Closer Look at Impact Risk:

The idea that financial returns and creating positive impact can go hand in hand is at the heart of impact investing. But what if this “win-win” thinking blinds us to the possibility that some investments aren't delivering the impact we assume they are?

In the paper “Who Loses in Win-Win Investing? A Mixed Methods Study of Impact Risk”, researchers dug into this question through 124 interviews with impact investors and an experiment with 435 participants. Their goal: to understand how investors perceive and act on impact risk—the likelihood that an investment’s social or environmental outcomes will fall short of expectations

According to the GIIN’s two most recent annual surveys of impact investors, only 1 to 2% of surveyed investors reported impact underperformances. If investors are not considering risk, these figures may be artificially, if inadvertently, deflated.

Here are the key insights:

1. Impact Risk Is Underexamined in Practice

Most investors pay close attention to financial risk but often lack structured processes for evaluating whether their intended social or environmental outcomes are being achieved—or even measured effectively.

2. The “Win-Win” Mindset Leads to Overconfidence

Rather than evaluating impact risk directly, many impact investors presume that they will succeed at having a positive effect on the world when they assess their investment options. Investors often believe that certain business models, like renewable energy or microfinance, are inherently impactful. This belief reduces the perceived need to assess impact critically, leading to untested assumptions.

3. Impact Performance Is Often Taken for Granted

Rather than investigating how one investment performs relative to another on impact metrics, many investors assume all “impact-branded” options are equally good. This limits learning and performance differentiation in the sector.

4. Investors Avoid Information That Challenges Their Beliefs

The study found a tendency to avoid evidence that might show a gap between intention and outcome. This selective information-seeking weakens accountability and risks reinforcing feel-good narratives over real outcomes.

5. Ethical Stakes Are High

Failing to rigorously consider impact risk doesn't just weaken strategy, it can actively harm communities and ecosystems. The paper argues that ignoring impact underperformance is an ethical lapse in a field that claims to prioritize people and the planet.

As the impact space matures, the study calls for a shift: from assuming impact to demonstrating it, and from framing every opportunity as a “win-win” to embracing the complexity of real-world outcomes.

News & Trends

• ⚡ The IEA reports that global energy demand rose by 2.2% in 2024, pushing energy-related emissions up by 0.8%, with record-breaking heat alone accounting for half of that increase. Heatwaves in China and India drove a surge in coal use for cooling. This offset some of the gains from renewables, which made up 92.5% of all new power capacity. Meanwhile, rising electricity demand from electric vehicles and data centres further increased power demand.

  

• 👀 SBTi has reversed its stance on carbon credits, emphasizing that companies should achieve net zero by transforming their operations and supply chains, not by relying on offsets. This shift follows a strong backlash against earlier suggestions that carbon credits could play an essential role in supporting climate transition plans. The use of high-quality carbon removal credits for hard-to-abate emissions is deemed to remain acceptable.

  

• 👨🏽‍⚖️ Apple faces a consumer lawsuit over claims that its carbon-neutral Apple Watch marketing is misleading. Plaintiffs argue the offsets used lack credibility, one involving already protected land, the other pre-forested areas. While Apple says it cut emissions from the product by 75% and used “high-quality” nature-based credits for the rest, the case highlights growing scrutiny of corporate offset strategies.

  

• 🌏 The UN’s World Meteorological Organization reported 151 unprecedented extreme weather events (worse than any ever recorded in the region) and over 800,000 people displaced in 2024, both all-time highs. Heatwaves, floods, and supercharged storms devastated regions worldwide, signalling a sharp escalation in climate-driven destruction.

• ⛏️ Since November 2024, Brazilian authorities have carried out 523 operations against illegal mining, seizing or destroying 90 camps, 15 vessels, 27 heavy machinery, and 224 engines and inflicting $1.9 million in losses. The Munduruku Indigenous Territory remains one of the hardest hit after a 363% surge in mining-related degradation during Bolsonaro’s term led to mercury poisoning, violence, and deaths.

  

Latest Impact Deals

• Al Gore’s Just Climate fund raised $175M from Microsoft and CalSTRS for nature-based climate investments. The new fund will focus on natural climate solutions, which could include everything from farming to forestry. It aims to restore nature, reverse biodiversity loss and reduce emissions from land use.

• Paris-based Fairly Made raised $16 million for sustainable fashion supply chains. Their software helps fashion brands bring visibility to their supply chains and manage their impacts. Textile life cycle analysis, for example, enables brands to optimize material choices and improve processes; digital passports track the origin of raw materials and manufacturing.

• Goldman Sachs launched a Climate Credit Strategy with $1 Billion in Initial Commitments. It provides tailored financing solutions to climate and environment-related businesses.