The European Impact Investing Consortium report reveals that unlisted impact investments grew by 20% between 2022 to 2023, with institutional investors making up a large part of the funding.
A new report has found that the European private impact investing market has reached €190bn, with the UK, Netherlands and France coming out as the leaders in the space.
‘The Size of Impact’ report is the result of the work of European Impact Investing Consortium, a partnership that brings together organisations including Impact Europe, GSG Impact and several of its European national partners, and leading academic institutions. The findings were unveiled at Impact Europe’s annual conference held in Bilbao last week.
The study found that investments in unlisted assets under management (AUM) increased 20% between 2022 and 2023. It also revealed that the amount of capital with an element of investor additionality has risen to 62%, up from 48% since the group published their last report in 2022.
Speaking at the opening of Impact Europe’s conference, CEO Roberta Bosurgi, said that although impact investments represent only 2.5% of the €7.6trn the consortium considers eligible for impact investing in Europe, the sector has grown significantly. “It’s now estimated at €190bn compared to €80bn just a few years ago, so the growth is impressive, with many new players stepping into the impact space.”
“Venture capital and private equity still account for about 40% of the market. But we now see on the horizon institutional investors, pensions funds, banks, and development finance institutions [coming in], giving us hope for scale.” She added: “However, the role of catalytic and patient capital is still very important. We need more catalytic, more patient and more risk-tolerant capital to enable the scale up of institutional [investments].”
Representing 28% of total AUM, institutional investors, including pension funds and insurance companies, have become the primary contributors to impact investments in private, unlisted markets.
A mix of social and environmental goals continue to be among the top three targeted SDGs, the report found, illustrating how impact investors represent a force for change in both impact categories.
The findings of this year’s study echo the trends identified in the group’s 2022 analysis, which reported SDG 8 – Decent Work and Economic Growth (62%), SDG 10 – Reduced Inequality (55%), and SDG 13 – Climate Action (46%) as the three most targeted SDGs.
While Decent Work and Economic Growth (47%) continues to hold the top position, Climate Action has moved up to second place to 47%, overtaking Reduced Inequality (38%), which now ranks third.
Leading markets
The study found that the impact investing market in Europe is currently led by the UK, the Netherlands and France, which hold the largest shares in terms of AUM. The report noted that these markets have benefited from robust regulatory environments, with their impact investor community having a high degree of institutional engagement.
The report also shed a light on which players are driving capital toward positive impact and where opportunities for greater engagement may be.
Venture capital and private equity (VC/PE) impact fund managers still represent the dominant category, representing 44.8% of the investors included in the study and holding 39.1% of direct AUM in unlisted assets.
Development finance agencies were found to deploy a significant 27.4% share of AUM in unlisted assets, which highlights the role they play in backing large-scale impact projects which might otherwise struggle to attract funding.
In addition to private equity, real assets, such as social housing projects, and social outcomes contracts have shown slight increases in usage among impact investors, according to the report.
