Five themes for 2024

Theme 5: Finding a solution with impact

For our fifth and final theme for 2024, we explore how impact investing will be critical to fighting climate change – through public as well as private markets investments.

A major highlight of COP 28 was the “unprecedented” deal by global leaders to explicitly mention fossil fuels – and their role in causing climate change – in the final text of the summit. But maybe the most important underlying development at December’s meeting was the clear desire of many participants to be part of the solution to the climate crisis.

Now the hard work begins on developing and scaling the technologies and solutions needed to mitigate and adapt to climate, planetary and social risks.

The fast-emerging impact investing market has a key role to play here.

According to Fairfield Market Research, impact investments – which are intended to generate positive, measurable environmental impact alongside a financial return – could be worth USD 4.5 trillion by the end of 2030.i

Impact investing has been well suited to private markets, where narrower stakeholder groups and more specific project-based investments allow for specific and measurable outcomes.

Reflecting on Allianz Global Investors’ impact investing in private markets, we published a whitepaper on how we approach the topic. In the paper, we outlined:

  • Our three sustainability typologies of Significant Positive Impact, Positive Benefits and Sustainability Improver. These are the types of impact that these investments could deliver, and by defining them on a proprietary basis we aim to better determine how impactful an investment could be.
  • Our assessment approach – using the Impact Management Project’s five dimensions of impact – which allows us to understand impact efficiency (the impact generated relative to the amount of investment required).
  • The importance of distinguishing enterprise contribution (the impact generated by the project we invest in) from investor contribution (the impact value we generate as an investor alongside our partners).

We think some long-held concerns about the challenges of achieving a market rate of return in impact investing are receding as the opportunity set expands.

Turning to public markets, a key challenge of scaling up impact investments lies in developing robust tools for measurement and evaluation. Through our impact investing experience in the private markets (recently demonstrated through the SDG Loan Fund collaboration with FMO and Skandia) and the framework outlined in the whitepaper, we continue to review how best to develop credible public market impact strategies over time.

As we wrap up our review of five sustainability themes to watch in 2024, we think impact investing has a growing role to play as the world seeks real-world solutions to the climate crisis.

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