Impact investing: fundamental trend or marginal evolution? Exploring the potential for banks and digital to address key challenges

Details

Supervisors

Colmant, Bruno

Faculty

Louvain School of Management

Degree label

Master [120] en ingénieur de gestion

Abstract

Impact investing – estimated worth of USD 502 billion in 2019 – (GIIN, 2019) is raising increasing interest. This disruptive investment approach purposes to solve global challenges by spinning off innovative financially sustainable business models meant to achieve both a financial return and a measurable social or environmental impact. By succeeding in demonstrating both market-rate financial returns and social and environmental value, it will entail the potential to unlock mainstream capital to scale up solutions to the most pressing societal issues, and eventually transform traditional finance. The burning question now is: Will it gain sufficient momentum to move away from a niche market and become mainstream? The purpose of this research is to investigate the challenges that prevent impact investing from scaling up and explore the potential for banks and digital to contribute to addressing them. It concludes that harnessing the full potential of impact investing will require preconditions to be met. Although not precisely quantified, the growing interest in impact investing and rising number of prospect investors is unanimously recognized. Consumers’ increasing attention to the social and environmental impact of companies will likely impulse further involvement from institutional investors. However, this potential will only be realized if measurement standards, enabling to benchmark investment opportunities and build a track record of financial performance, are agreed and if a sufficient number of qualifying investees are identified and brought to a scalable stage. Leveraging partnerships with traditional finance intermediaries – like banks - and the power of digital would be instrumental in, among others, bridging the gap between an early stage fragmented market and mainstream finance. Finally, findings from our interviews led to some recommendations for banks’ more effective involvement in the sector.