The non-profit says in its latest report that impact investing techniques and strategies are entering the mainstream, with more outcomes contracts and the development of national-level impact wholesalers being key trends.
Greater use of outcomes contracts and the development of national-level fund-of-funds impact wholesalers are among leading trends identified in a new publication from GSG Impact that provides a snapshot of the global impact investment landscape.
In its Impact Economies Traction and Trends report, GSG Impact provides summaries of the impact investing sector in 34 countries across both developed and emerging markets. The publication was launched at a GSG Impact conference, hosted by the organisation’s local partner GSG Impact Japan. GSGI works to promote impact investing with over 40 national partners, covering two-thirds of the global population.
Alasdair Maclay, GSG Impact’s managing director, told Impact Investor the publication is intended to help investors and governments to take stock of recent progress in the sector, complementing the work of other national and international bodies, such as the Global Impact Investing Network (GIIN).
“The purpose of the report is to provide data for investors interested in entering a particular country so they can understand how the impact economy is progressing there. Another audience is our national partners and colleagues in the countries themselves, so they can get a better sense of how they are progressing compared to other countries,” he said.
The authors said impact investing strategies were becoming part of wider investment strategies in some countries.
“Many governments are increasingly embedding impact investing into national development plans and policy agendas, signalling a shift from isolated initiatives to long-term strategic priorities,” according to the report.
Growing international collaboration had allowed impact techniques such as outcomes contracts to gain traction in the developing world.
“One example is outcomes-based partnerships or financing methods, specifically in the education sector. Learnings from Ghana have transposed very well to Sierra Leone and now to South Africa,” Maclay said.
Wholesaler model spreads
Another area where GSGI and its partners have had success is in promoting the adoption of the impact investment wholesaler model, pioneered in the UK by Better Society Capital. Typically, this involves creating a fund-of-funds investor to help grow domestic impact capital and involves strengthening market capacity.
For example, Japan’s JANPIA wholesaler was created in 2019, having followed the example of BSC in using funding leveraged against unclaimed money accrued in dormant bank accounts.
In Ghana, a fund-of-funds vehicle known as Ci-Gaba – sponsored by GSG Impact partner Impact Investing Ghana – is due to be launched in the coming months. The $75m (€65.8m) blended finance vehicle will mobilise funding from catalytic capital providers and local asset owners, mainly pensions, to invest in venture funds and SMEs targeting progress towards the UN Sustainable Development Goals. Learnings from both BSC and JANPIA had been central to developing Ci-Gaba, according to Maclay.
“We have been involved in about a dozen national impact investment wholesalers so far, and we hope to announce to six or seven more over the next couple of years. In some case, like Sri Lanka, these may be the first impact fund in the country,” he said.
Impact Investor also talked to GSG Impact’s Krisztina Tora in October 2024 about the non-profit’s support for new impact investment wholesalers around the world.
Among the other main trends identified in the new report is the wider uptake of green bonds and sustainability-linked bonds, which are becoming more mainstream instruments to raise capital for environmental and social projects.
Meanwhile, state-level development finance institutions (DFIs) were increasingly acting as catalysts for impact investment in emerging and domestic markets, which in turn is helping to unlock institutional and retail capital for impact.
“A positive trend is that we have seen more and more DFIs setting up or providing a cornerstone for investment vehicles, rather than investing directly into banks or SMEs,” Maclay said.
Standards adoption
The report also stresses the importance of global sustainability disclosure standards in advancing impact transparency. It notes that more countries have been aligning with international sustainability disclosure standards, in particular IFRS Sustainability Disclosure Standards S1 and S2 covering sustainability and climate-related disclosures, released by the International Sustainability Standards Board (ISSB). This trend should improve comparability of ESG and impact data, build credibility in the market, and prevent impact washing.
GSG Impact highlighted Turkey’s decision to make sustainability reporting mandatory for companies and financial institutions that meet specific thresholds, aligning with ISSB standards, as well as plans in Brazil for all listed companies and investment funds to publish reports in accordance with IFRS S1 and S2 by 2026.
Impact-based investment remains a small subset of overall global investment, but Maclay said its influence on investing techniques and strategies continued to grow. “Impact investment is still a small part of the overall investment market, but it is one of the fastest growing asset classes, and impact investment tools are being used now in in a range of mainstream activities, like sustainability-linked bonds, which are now a significant asset class in their own right,” he said.
