Impact investing has been on a steady growth trajectory, even as stock markets face increased volatility in 2023. With rising interest from retail and institutional investors, assets under management in impact funds could reach $1 trillion by 2025. Key drivers are growing millennial and women investors opting for values-based investing. Leading asset managers like BlackRock, Vanguard and Morgan Stanley have launched new impact investing funds focused on clean energy, healthcare, financial inclusion and sustainable agriculture.
Growing interest from millennials and women in values-based investing
Millennials and women investors are showing heightened interest in having a positive social or environmental impact alongside financial returns. This reinforces the continued growth of impact investing in 2023 despite stock market uncertainty. According to Morgan Stanley, 95% of millennial investors are interested in sustainable investing. Additionally, women investors are nearly 2x more likely to invest in companies with positive social and environmental impacts.
Rise of ESG integration by institutional investors
Mainstream institutional investors and asset managers are integrating ESG factors and impact objectives into investment decisions. BlackRock, the world’s largest asset manager with $10 trillion in assets, plans to expand its impact fund offerings after seeing robust interest from institutional clients. Similarly, Goldman Sachs Asset Management folded its impact fund into its flagship equities platform after seeing investments from large pension funds.
Growth in sustainability-focused index funds and ETFs
Passive investing vehicles like index funds and ETFs focused on sustainability are seeing record inflows. Top index fund providers BlackRock, Vanguard and State Street have launched sustainability index funds tracking benchmarks like the MSCI World ESG Leaders Index. These low-cost products provide easy access to impact investing to retail investors.
Impact investing is set for steady, secular growth as part of a broader sustainability investing trend. Key drivers are millennial and women investors opting for values-based investing and institutional investors integrating ESG factors. Passive fund products focused on sustainability are also fueling significant growth.