This new form of investment was worth $3.3 Trillion in 2020. Here’s why it is growing.

As economies worldwide were struck down by the COVID-19 pandemic last year, a new form of investment, fuelled by climate change and social activism, gained ground.

The term impact investing has been around for a decade now, but its crescendo only arrived in 2020, according to a report released by the International Finance Corporation (IFC). The Global Impact Investing Network describes impact investments as “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.”

The Washington-based lender says that impact investments reached a record $2.3 trillion globally in 2020. It attributed this rise to a boost in popularity due to heightened awareness of social challenges such as unequal access to healthcare and racial and gender inequality, as well as increased attention to the effects of climate change.

Companies with solid Environmental, Social, and Governance (ESG) practices outperformed their peers last year, leading to a shift in the way institutions invest.

Green, Social, and Sustainability Bonds also grew in popularity last year. Kenya welcomed its first green bond in January 2020 after Acorn Holdings listed the bond on the Nairobi Securities Exchange. According to the report by IFC, cumulative investments in green bonds have so far exceeded $1 trillion.

“There is still tremendous opportunity to bring impact investing to the next level. The pandemic shook society to its core, causing us to reconsider our values. Impact investing allows the opportunity to align assets with convictions, and we encourage more investors to become impact investors,” said John Gandolfo, IFC’s Acting Vice President, Economics and Private Sector Development and Treasurer.

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