Impact investing gaining more traction, says IFC

MANILA, Philippines — Impact investing is now gaining more traction as institutional investors commit to use billions of dollars in resources for projects that can help meet development goals, the International Finance Corp. (IFC) said.

In a statement yesterday, the sister organization of the World Bank said 60 global institutional investors are adopting its Operating Principles for Impact Management – a market standard for impact investment in which “investors seek to generate positive impact for society alongside financial returns in a disciplined and transparent way.”

“The principles bring greater transparency, credibility, and discipline to the impact investing market,” IFC said.

“The principles draw on IFC’s experience in investing in emerging markets to achieve strong development impact and financial returns,” it added.

These institutional investors collectively hold $350 billion in assets invested for impact projects, which they commit to manage according to the principles, IFC said.

“Future investments for impact will also adhere to the principles. The principles provide a clear common market standard for what constitutes an impact investment, addressing concerns about impact-washing,” it added.

IFC said it led the development of the principles, in partnership with leading asset managers, asset owners, asset allocators, development banks, financial institutions, and the public through a three-month public consultation.

“We believe there is now potential to bring impact investing into the mainstream,” said IFC CEO Philippe Le Houérou. 

“Our ambitions are very high – we want much more money managed for impact because there’s no time to lose to deliver on the billions to trillions agenda,” he added.

In a report released earlier, IFC said there is now a growing appetite for impact investing worldwide that can potentially benefit emerging economies like the Philippines by way of investments that support the attainment of Sustainable Development Goals (SDGs)

It said as much as $269 trillion in financial assets held by institutions and households globally is potentially available for investment.

IFC said that if just 10 percent of this – $26.9 trillion – were channeled towards investments focused on environmental and social outcomes, it can speed up the attainment of SDGs and facilitate the shift to a low-carbon future.

Citing the results of a survey of asset managers Le Houerou said 86 percent of respondents said they ventured into impact investing because of client demand.

Demographic shift, he said, is driving some of the demand as younger investors increasingly favor “socially and environmentally motivated investment strategies.”

Le Houerou said social and environmental causes most important to investors are those embedded in the SDGs like health, education, as well as water supply and sanitation.

He said turning these resources into actual investments “will depend on the creation of investment opportunities and investment vehicles that enable investors to pursue impact and financial returns in ways that are sustainable,”

As an impact investor with a current focus on emerging markets that include the Philippines, IFC said the region can benefit from this new investment appetite.

Estimates for this year shows that meeting the SDGs in just five key areas – education, health, roads, electricity, and water and sanitation – will require additional annual spending in 2030 of $0.5 trillion in low-income developing countries and $2.1 trillion in emerging market economies.

The organization said it is willing to work with a much broader base of investors and development finance institutions to mobilize funds for SDG-related investments be it in the form of green bonds or other forms of sustainable project finance.