Today I’m sharing five trends that I predict will guide and define the impact investing industry in 2024. We all know there are immense challenges and opportunities ahead of us, and I move into the new year with grounded optimism in our industry’s ability to mobilize capital toward solutions for the world’s most pressing issues.
Mainstream financial institutions and investors increasingly show an interest in and commitment to impact investing. Instead of considering social and environmental factors only in risk mitigation, these investors seek positive outcomes alongside financial returns. Institutional and individual investors observing global challenges increasingly turn to impact investing for sustainable long-term returns and solutions for future generations.
While this is a promising development, it is as important as ever that the market grows with integrity. As part of the GIIN’s work to support this expansion, we released guidance for impact investments in listed equities — a growing frontier for our industry. We aim to equip investors with all the tools they need to pursue positive, intentional impacts.
There are also more forward-thinking investors treating impact as a lens that can be applied across all investments, rather than solely as a strategy reserved for a portfolio carveout. We recently released guidance for institutional asset owners interested in applying this crucial approach that enables them to contribute to progress on issues of concern even as they generate required financial returns.
These asset owners have pushed the boundaries of what they offer beneficiaries, taking active steps to improve the world they live in with investments that promote a healthy environment, a fair and stable economy and social equity. The growth of this strategy will unlock significant capital that can be channeled to solving the world’s most pressing challenges in 2024 while meeting fiduciary obligations.
2. Climate solutions and resiliency will continue as major opportunities for improving people’s lives
At COP28 I was energized by people from all different walks of life working together to address the climate crisis. It also highlighted that investing in climate is about more than reducing greenhouse gas emissions, it also means responding to the devastating impacts of climate change on people and ensuring that society navigates a changing world.
These impacts on people are particularly acute in developing countries and emerging markets where climate change is expected to cost $400 billion. Investments in climate adaptation and resiliency in these markets present an opportunity for both impact and financial returns often overlooked by investors. Developed economies also have needs for investments in climate responses; 3 million people were displaced in the U.S. due to natural disasters increasingly intensified by climate change in 2023.
GIIN research has shown that many impact investors have significant experience in emerging markets, and can serve as leaders for deploying capital to help communities and high-impact businesses successfully navigate a changing climate. This past month, we launched a climate adaptation and resilience theme in IRIS+. This tool gives investors the resources and metrics to be more effective in financing climate adaptation and resilience. In 2024 we expect to see significantly more impact investing at the intersection of climate and people.
3. Blended finance will play an even bigger role going forward
Blended finance has always been a hot topic, as impact investors look for structures that extend the reach of investments to new business models and solutions, underserved markets and marginalized populations.
The durability of this discussion reveals the opportunities it presents as well as the challenges of executing this at scale. Yet, in late 2023 we saw significant developments for blended finance; I applaud our friends at Allianz, FMO Investment Management, Skandia and the John D. and Catherine T. MacArthur Foundation for launching the Sustainable Development Goals Loan Fund which has surpassed $1.1 billion in private capital invested in emerging markets through a blended finance structure.
At COP28, Allied Climate Partners was launched to provide catalytic capital to accelerate the development of bankable climate projects in emerging economies and we’re excited that many GIIN members are involved as investors and partners, alongside the initial funding group: Arnold Ventures, Ballmer Group, Bezos Earth Fund, Anita and Josh Bekenstein, the Children's Investment Fund Foundation (CIFF), Sea Change Foundation International, the Soros Economic Development Fund (SEDF) and Three Cairns Group. In 2024, I expect to see even greater deployment of blended finance to extend the reach of markets, both as a means of advancing innovation and to mobilize capital at scale.
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4. AI will unlock significant opportunities for positive impact
AI technologies promise to transform our world and the ways we do nearly everything — from business to healthcare to education and more. For impact investors this looks like investing in tools that address the climate crisis and improve financial services; employing natural language processing to identify greenwashing and gauge global sentiments; and using AI to improve impact data collection and reporting.
I expect that in 2024 we’ll see an increasing number of businesses and investors engage with AI and explore its utility to enhance their impact. As AI grows in reach, it’s vital that we find pathways for AI safety to ensure that this technology improves equity and sustainability around the world to revolutionize the status quo, rather than worsening it.
5. Impact investing will have new resonance amidst global elections
About 4 billion people, nearly half the world’s population, will vote in elections in their countries in 2024, making it the largest election year in history. These elections define a pivotal moment in our fight against inequality and a degrading environment.
Governments play an instrumental role in regulating financial markets and shaping important sectors for impact investors such as agriculture, education, energy, financial services, healthcare and housing. As the world undergoes an unprecedented political transition in 2024, impact investors can harness this moment to build broader buy-in.
This is a time for impact investors to continue making concrete impacts on people’s lives and lean into storytelling to effectively champion the change we need for people and the planet. We can invest in the rural and urban economies that have been left behind, improve sectors like agriculture and healthcare, and increase financial access to make economic prosperity available to all. By delivering and communicating these tangible outcomes, impact investors will find a broader audience and demonstrate the power of our industry to improve people’s lives in 2024.
