The roots of impact investing

Upon assuming the presidency of the Rockefeller Foundation in 2005, Dr. Judith Rodin openly stated an intention to realign the foundation’s operations to meet the world’s increasingly complex development needs more effectively. While the pool of total available philanthropic capital was expanding, it became clear that these resources alone (even when combined with governmental financing and developmental aid) were not enough to tackle the magnitude of the world's development challenges.

Concurrently, in 2006, the United Nations Principles for Responsible Investing (UN PRI) were unveiled, boasting 63 signatories and a combined asset value of USD 6.5 trillion. Rooted in the fundamental principle that environmental and social considerations hold relevance in investment decisions, UN PRI has since burgeoned to encompass a staggering 4,900 participating financial institutions, wielding a colossal USD 121 trillion in assets today.

In 2007, the term ‘impact investing’ was first coined at a conference convened by the Rockefeller Foundation in Italy. This gathered together a diverse array of stakeholders, including entrepreneurs, philanthropists, investors, and visionaries. Subsequently, the foundation incubated the Global Impact Investing Network (GIIN), a non-governmental organization dedicated to amplifying the scale and efficacy of the impact investing sphere.

A little later, in 2009, the world’s first social impact bonds (payment against social outcomes achieved) were designed and launched through UK based Social Finance. These innovative products quickly gained traction, benefiting both investors financially and underserved communities socially. By 2016, social impact bonds had spread to 15 countries by then, with over 60 instances promoting social development goals.

Similarly, in 2008, the World Bank issued the first green bond following the 2007 Intergovernmental Panel for Climate Change’s report with a USD 300 million issuance. This report provided the impetus for the global community to take immediate action to deal with climate change. By 2023, the green bond market annual issuance is estimated to be around $1 trillion USD across 50 countries.

Since 2020, remarkable advancements have been made globally across a wide spectrum of developmental indicators, both environmental and social, signifying progress in average global well-being and quality of life. Below is a snapshot showcasing the substantial improvements made over the last two decades in areas such as GDP per capita, maternal mortality ratio, literacy rate, poverty headcount ratio, and access to electricity. These figures elucidate the substantial strides taken towards fostering a world that is more equitable, prosperous, and sustainable.