Impact investment and Covid-19

While global investment is expected to fall sharply this year as a result of the coronavirus pandemic, impact investment – the funding of projects that generate a positive social or environmental impact, as well as a financial return – is tipped to hold relatively steady, and could play a key role in the recovery of emerging market economies.

Thus, in a sign of the depressed business sentiment that has accompanied the virus-related economic slowdown, UNCTAD, the UN’s trade body, predicted in June that global foreign direct investment flows would fall.​

However, the sentiment in impact investment – which is commonly directed at projects in the renewable energy, housing, health care and education sectors – appears to be more resilient.
​​According to a survey of 294 impact investors conducted over March and April 2020, a majority (57%) of respondents said they would maintain their 2020 investment plans, while 16% even expected to increase the amount of capital they invest. The report, published by the New York-based Global Impact Investing Network (GIIN), found that 20% were planning to decrease investment, while 7% were uncertain.

Indeed, the survey results have been reflected in several high-profile investment decisions. These include a move in May by Norges, the world’s largest sovereign wealth fund, to divest from 12 companies engaged in oil and gas exploration, while Italian asset manager Azimut announced plans to raise €1bn for a social infrastructure fund to invest in care homes, schools and student housing.

In addition, On May 12, 2020, GIIN launched an investment coalition, which aims to bring together various impact investing networks to address the large-scale socio-economic challenges of Covid-19.
Last but not least, most impact investors are based in Europe and North America, their investment plays a major role in developing economies. The GIIN survey suggested that the coronavirus pandemic had created some uncertainty about their appetite for emerging market risk. Of those who responded that they were looking to reduce their investment as a result of the coronavirus (20% of respondents), the overwhelming majority had assets in emerging countries. On a more positive note, 58% of all respondents were looking to invest in sub-Saharan Africa in response to Covid-19, the highest figure globally; Latin America came in second with 41%

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