Seven things to watch in impact investing in 2025

If there’s one thing that’s certain about the year ahead, it’s that it will be a year of change. Voters around the world have rejected incumbent governments and demanded something different in the U.S., Germany, Botswana, the U.K., Japan and beyond. Times of upheaval are also times of opportunity, and I believe private capital will play an increasing role and find new avenues to improve lives and protect our planet. Here are seven trends to watch out for as we enter 2025:??

1) A renewed focus on the working class and poor

Governments around the world are under pressure to deliver for their constituents. People are demanding access to quality jobs, economic opportunities and a liveable environment. Building widespread financial stability will be a critical goal, and will involve improving access to financing, increasing affordability of basic needs like housing, and building wealth through structures like worker-owned businesses. Improving quality of life will also mean breaking down historic inequities, from urban to rural environments, and giving people the means and opportunity for a better life. While many impact investors have already been actively investing towards these goals, governments will be looking to mobilize more private capital for these solutions.??

2) Emerging market investing getting more global attention

Many countries from Indonesia to Brazil to Nigeria still have their growth stories ahead of them. The development of these economies is critical, and must happen in a way that ensures social equality and a healthy planet. There’s a massive opportunity for investors in these transitions: they can invest in businesses and industries while using impact goals to help ensure a stable social and environmental future.?

We’re already seeing interest in those opportunities grow. 43% of investors planned to increase their allocations to emerging markets, according to the GIIN’s State of the Market 2024 research.

Moreover, as developed country governments focus on domestic inequality in response to voter pressure, there could be a diversion of resources away from international aid and a greater emphasis on mobilizing investment. Impact investors can step in to bridge that gap, and get money to the places where it’s needed most.?

3) A growing demand and supply for catalytic capital?

Ambitious goals like promoting lasting, sustainable, inclusive growth will require innovative financial strategies to see success. We are seeing an expansion of investors, particularly high net worth families, who are committed to solving problems and are looking to use different types of capital to address them. More investors are signaling an interest in using catalytic capital to take bold steps to achieve their goals, in areas including economic revitalization, gender equity, climate solutions, regenerative agriculture and food systems, and beyond.?

Catalytic capital is precious, and 2025 will open a window of opportunity to mobilize it as the world looks to private sources to step up to address global issues.?

4) Continued interest in blended finance

I also expect to see continued interest in blended finance, as investors have made progress in using catalytic capital to unlock much larger and more impactful opportunities than were previously available. These strategies involve pairing patient, risk-tolerant capital with capital from investors seeking market-rate returns. Experienced impact investors expanding to new markets and models are increasingly looking to blended finance to de-risk investments. While some of the long-standing challenges to blended finance remain, the progress last year has energized interest and given investors some new models to build from. I expect particular interest in blended finance from investors looking to mobilize capital to specific strategies and geographies.?

5) An expanding impact investing market in Asia?

This is a particularly exciting time for impact investing in Asia, due to growing activity from institutional and individual investors alike. We are also seeing governments support the development of the market.?

There’s increasing interest from investors headquartered in Asia, and others investing heavily in Asia, to pair investments with positive outcomes. The GIIN’s recent report, In Focus: Impact Investing in Asia in 2024, found that out of 68 Asia-focused investors managing over $38 billion USD in impact AUM, 89% said their financial returns were in-line with or exceeded their expectations. This signals the development of an accelerating impact investing market, which could take off in 2025. Realizing that potential will mean developing connectivity across global markets and taking every opportunity for leadership.?

6) Climate solutions rising on the agenda

As investors’ approaches to climate finance evolve, I expect to see more interest in climate solutions investing. Investors are increasingly moving from tracking emissions to driving progress in emissions reduction. This will lead to more investment in solutions, which includes the technologies, assets, or business models that substitute zero or low-emissions products and services for high-emitting ones. Investors will increasingly address specific needs for people and companies in areas like agriculture, energy, food, materials and transportation, among others.?

The broader technological innovation agenda is only going to drive demand for climate solutions. Energy demand will rise as AI takes off, and companies are looking for innovative sustainable technologies. Investors’ success in financing and deploying high-impact climate solutions will be a critical step in securing a positive future for humanity.?

7) The need to nail the narrative?

With strong growth over its 15 year history, the impact investing industry is in a formidable place with buy-in from a broad set of investors and stakeholders. We’ve seen dedicated investors pioneer strategies and innovations across sectors and work toward a better world. As politics and perceptions of the economy shift, we need to speak to people seeking answers and solutions, and connect the dots that impact investing is the avenue to securing our future. Now, we need to nail the narrative that connects impact investing to the solutions people are seeking.?

Look at the U.S. market, for example. 82% of U.S. retail investors said it is important to consider protecting nature and wildlife in investments, and 78% said reducing economic inequality is important to consider in investments, according to a 2024 GlobeScan survey. According to the same survey, around the world the vast majority of retail investors support action by investment funds on climate change, protecting nature and wildlife, and addressing economic inequality. These statistics confirm what we know to be true: that impact investing resonates across the political spectrum and a strong majority of people want to invest their hard-earned money in a better society and a healthy environment.?

What is impact investing for??

Transcending these seven themes is the purpose of impact investing. It’s a tool that harnesses the efficiency of markets to solve problems and seek opportunity. It’s a tool that builds houses, creates quality jobs, treats disease, conserves land, grows nutritious food, installs renewable energy and creates a better world. I thank everyone who is putting this tool to work, and I encourage all of us to find new and innovative ways to expand its reach in the coming year.?

Amit Bouri