IMPACT INVESTMENT: ALTERNATIVE FUNDING FOR ENVIRONMENTAL ISSUES

Abstract

Money is an important and powerful tool that has a huge impact on global issues, such as poverty, climate change, and ageing. These international challenges are no longer only managed by governments or international institutions, but also by capital investors, who are becoming more aware of the importance of considering social and environmental matters in their investment decisions. Financial institutions have been issuing new products to meet the demands of these investors and initiating their own research, donation, and investment activities, considering Environmental, Social, and Governance (ESG) Criteria to be a part of their Corporate Social Responsibility (CSR) commitments. Capitalism is currently on track to develop and expand new strategies, called “social investment,” for a sustainable society. Among the various social investment strategies, “impact investments” are growing by attracting investors who have clear intensions to simultaneously obtain both capital and social/environmental returns. Impact investments are a relatively new investment strategy and include private investments. As a result, it is still challenging to examine the entire area of impact investment due to the limited availability of relevant and specific market data. To find the key drivers for further impact investment market growth, this report attempts to analyse the status of this market and its trends. In the past few years, climate change has become one of the most influential topics in politics and economics. Solving environmental issues requires a change in standard economic activities, and impact investment products are some of the most practical instruments for fundraising for green projects. This report will also focus on the most popular green impact investment products. Examining the transition of the issuer countries of green bonds in the past three years shows that issuers have expanded across the globe. An analysis of the green bond issuers category shows that its diversification brought about the vitalization of the green bond market. In anticipation of continuous green bond market growth, this report provides some drivers for future market expansion. Finally, this report presents a case study of two impact investment markets, comparing the strengths and weaknesses of each. Through its variety of impact investment market character descriptions, this report ultimately aims to discuss the possibilities for impact investments to become part of the mainstream in the capital market.