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Impact investment: the next frontier

At less than a decade old, impact investing is quickly gaining ground. But how can social investments gain a larger share of the financial market?

Impact investing is on the rise as millennials, corporates and startups drive demand for financial returns that generate social good. But the global market, estimated at $114bn at the end of 2016, has yet to near a tipping point that could see it leverage a much larger share of all managed investments.

“There’s a long way to go,” Michele Giddens, cofounder of the UK-based Bridges Fund Management, said at a conference hosted by The Economist earlier this month. “Of the $100 trillion invested globally, just 1 per cent goes to impact investment.”

At less than a decade old, impact investing is still a fledgling sector. But its ability to deliver healthy returns and social impact has spurred financial houses such as Goldman Sachs and BlackRock, corporates and philanthropic funds to expand in the area.

“This isn’t thinly disguised CSR [corporate social responsibility] or a marketing initiative,” said Laurie Spengler, president of global advisory firm Enclude. “Businesses are recognising real, unanticipated opportunities.”

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