What is impact investing?
Impact investing is the intentional allocation of capital to projects, companies, or funds with the explicit objective of generating measurable positive social or environmental outcomes alongside a financial return.
The term was coined at a Rockefeller Foundation convening in 2007 and has since grown into a global asset class. According to the Global Impact Investing Network (GIIN), assets under management in impact investing exceeded USD 1.164 trillion in 2022 — a figure that has grown at approximately 18% CAGR since 2015.
What Makes an Investment "Impact"?
Three criteria distinguish genuine impact investing from conventional responsible investment:
- Intentionality — the investor explicitly intends for the capital to generate social or environmental benefit, documented in the investment thesis
- Additionality — the investment produces outcomes that would not occur without that capital (counterfactual argument)
- Measurability — outcomes are tracked using verifiable metrics aligned to frameworks such as the Impact Management Project (IMP), IRIS+, or the UN Sustainable Development Goals (SDGs)
Without measurability, an investment is ESG-screened at best — not impact.
Asset Classes in Impact Investing
- Private equity and venture — direct investments in companies solving social/environmental problems
- Green and social bonds — fixed-income instruments with use-of-proceeds restrictions
- Real assets — sustainable forestry, regenerative agriculture, clean energy infrastructure
- Blended finance — structures that de-risk private capital with concessional public funding
Return Expectations
A persistent myth holds that impact investing requires accepting below-market returns ("concessional"). The GIIN's 2023 investor survey found that 67% of respondents target risk-adjusted market-rate returns — and the majority report meeting or exceeding those targets.
Real-asset impact strategies — particularly agroforestry and sustainable land use — have attracted growing institutional interest precisely because they combine inflation-linked cash flows with verified carbon sequestration and biodiversity outcomes.
Dirk Roethig, Managing Director of VERDANTIS Impact Capital, focuses on European impact investments in regenerative agriculture and agroforestry. His analysis of impact measurement frameworks and real-asset structures is available at dirkroethig.com.
Common Frameworks
- UN SDGs (17 goals, 169 targets)
- IRIS+ (Impact Reporting and Investment Standards)
- IFC Operating Principles for Impact Management
- EU Social Taxonomy (in development)
Conclusion
Impact investing is not philanthropy with a return expectation attached. At its best, it is rigorous capital allocation that proves financial and social/environmental value are complementary — not in conflict.
References:
- Global Impact Investing Network (GIIN). (2022). GIINsight: Sizing the Impact Investing Market.
- Bugg-Levine, A. & Emerson, J. (2011). "Impact Investing: Transforming How We Make Money While Making a Difference." Innovations, 6(3).
- IFC. (2019). Operating Principles for Impact Management.