Impact insights #4

Welcome back to the ESGI Horizon Newsletter! We're excited to share key insights from the GINN 2024 State of the Market report, providing valuable perspectives on the evolving landscape of impact investing. We'll also touch on recent news and trends, including significant legal developments in climate action and major impact investment deals.

Focus Article: State of the Market 2024 GIIN

The Global Impact Investing Network (GIIN) has released its highly anticipated State of the Market report, offering valuable insights into the evolving landscape of impact investing. Based on a survey of 305 organizations across 39 countries, representing a combined $490 billion in assets under management (AUM), the report highlights several key trends:

Steady growth in impact investing assets: Impact investing AUM have grown at a compound annual growth rate (CAGR) of 14% over the past five years. This growth reflects the increasing recognition of impact investing as a viable and effective strategy for addressing global challenges while generating financial returns.

Shifting Strategies: A notable trend is the rise of equity-like debt and public asset investments. Equity-like debt, which blends features of both debt and equity, has seen a remarkable 104% CAGR since 2019. This shift suggests investors are exploring more diverse and sophisticated approaches to achieve their impact goals. Investors still overwhelmingly allocated impact capital through private equity.

Satisfaction with financial performance: Impact investors report high satisfaction with their financial performance, even when targets aren't fully met. 90% indicate their impact returns met or exceeded expectations, with 86% reporting the same for financial returns. However, the report identifies a significant need for improved data transparency and verified performance data to better assess and compare actual impact performance.

Impact Measurement and Management (IMM): Over two-thirds of investors are incorporating impact criteria into their investment governance documents, signalling a significant shift towards formalizing impact considerations in decision-making processes. Nevertheless, investors are experiencing a fragmentation in the choice of IMM frameworks and metrics. This fragmentation hinders comparability and makes it difficult to establish industry benchmarks. Although 40% of investors seek third-party verification for their IMM processes, less than a third do so for their impact results. The GIIN emphasizes the importance of independent verification for both processes and outcomes to ensure accountability and prevent impact washing.

News & Trends

• ⚖️ South Korea's Constitutional Court declared the country's missing climate targets unconstitutional, stating they failed to adequately protect the rights of future generations. The ruling stems from a lawsuit brought by youth climate activists challenging the lack of binding emissions reduction targets beyond 2030. This landmark climate ruling is expected to influence similar climate litigation efforts across Asia, particularly in Japan and Taiwan.

  

• ⚡ In the World Energy Outlook 2024, the International Energy Agency reported that global investment in clean energy projects is approaching $ 2 trillion annually, almost double the combined amount spent on new oil, gas and coal supply. More than 560 gigawatts of new renewables capacity were added in 2023, with China accounting for 60% of it.

  

• 🌊 Australia announced it will protect 52% of its oceans by expanding the Heard Island and McDonald Islands Marine Reserve. The two islands, located about 1,700 km from Antarctica, are “wildlife havens”, and the decision means that the waters around them would be free from mining and the creation of new fisheries. This expansion quadruples the current reserve size with an area roughly equivalent to the size of Italy. WWF welcomed the significant expansion of the park but is concerned that fishing is still allowed within the reserve, advocating for the highest level of protection for this ecosystem.

  

  
  

Latest Impact Deals

• Sistema.bio a social enterprise providing biogas technology, training and financing to smallholder farmers, has secured $15 million in new funding. This investment will fuel the company's global expansion, enabling them to reach more farmers and further reduce greenhouse gas emissions while improving livelihoods. Their biogas technology transforms animal waste into clean biogas for cooking, heating, and electricity generation, and produces nutrient-rich biofertilizer that boosts agricultural productivity.

• Blue Alliance and BNP Paribas launched the Blue Finance facility, a $ 35 Million impact loan facility dedicated to coral reef conservation. This initiative will provide crucial financing for reef-positive businesses and support the development of Marine Protected Areas in the Global South.

• Citi structured a $15 million social impact and trade loan aimed at increasing access to credit for small and medium-sized enterprises (SMEs) in El Salvador. By supporting local businesses, this loan will promote inclusive economic growth and financial inclusion in the country.

• Vivriti Capital secured a $25 million climate bond from the Asian Development Bank (ADB) to finance companies advancing clean energy, electric vehicles and sustainable waste management solutions in India.