The Acceleration of Impact Investing

Market Performance and Scale

• Global public market ESG assets surpassed the $1 trillion threshold recently.
• Growth in ESG strategies was particularly pronounced between April and June.
• Public markets increasingly prioritize business models with stakeholder resilience and alignment with green government recovery programs, especially in Europe.
• European regulation now mandates ESG analysis across investment strategies, driven by investor demand.

Sector-Specific Trends and Investment Flows

• Acceleration in Growth Sectors:
  • Digitization: Continued momentum in remote learning education and telemedicine, supported by regulatory shifts due to the pandemic.
  • Clean Energy: Resilient performance despite oil and gas price drops; projected to remain the predominant technology for new global power installations.
  • Electric Mobility: Significant growth in electric vehicles (EVs), EV infrastructure, and autonomous vehicle technologies despite negative impacts on mass transportation.
  • Food and Agriculture: Sustained growth in alternative proteins due to health concerns regarding meat and expanded online sales of healthy consumer products.
• Decline in Negative-Impact Sectors:
  • Ride-sharing applications and mass transportation investments faced direct downward pressure.
• Corporate Commitments:
  • Over $11 billion in corporate commitments to purchase voluntary carbon mitigants was recorded over the last year.
  • Microsoft pledged to offset all emissions since its 1975 founding and invested $1 billion in a climate innovation fund.
  • Corporate decarbonization targets are expected to accelerate capital flows into climate transition themes and new carbon reduction technologies.

Macro-Drivers of Impact Investing Growth

• Climate Risk:
  • 15 of the most destructive natural disasters last year each exceeded $1 billion in cost; seven exceeded $10 billion.
  • California fire season activity reached 3.5 million acres burned, compared to a historical average of 300,000 acres.
• Inequality:
  • Global wealth inequality has reached levels not seen since the 1920s, with the top 1% owning half of global wealth.
  • Pandemic conditions are expected to exacerbate existing income inequality trends.
  • Investment focus is shifting toward inclusive growth in financial inclusion, education, and healthcare to address underserved populations.

Investor Behavior and Diversity

• Interest in impact strategies has accelerated across individuals, institutions, and corporations.
• Private investors are increasingly prioritizing diversity and inclusion, specifically seeking diverse leadership teams for racial and gender equity alignment.
• Private equity firms are integrating ESG into core investment processes and launching dedicated impact strategies at larger scales and later stages.

Strategic Perspective on Financial Trade-offs

• Ames Imprint reports no evidence of financial trade-offs over 10+ years of ESG and impact investing.
• Financial and impact outcomes are viewed as aligned when divergence between the two does not exist.
• Success requires a research-intensive approach to identify opportunities, particularly given nascent data in emerging themes.
• Impact measurement demands detailed assessment of underlying business models and specific metrics to demonstrate value.