On the "impact imperative" for sustainable development finance and impact investments as a means to achieve the SDGs. 

Between $5-7 trillion needed annually to achieve the SDGs (UNCTAD, 2017; WEF, 2018), including $4 trillion for Emerging Markets alone (WEF, 2018). In order to mobilize these essential financial resources for sustainable development, innovative models of development finance, public funding, private investments, need to evolve. The Addis Ababa Action Agenda (AAAA) encourages new forms and synergies in financing for sustainable development such as impact investing as a means to achieve the SDGs (paras. 37, 42). There is a need to develop enabling policy environment as well as new performance metrics for new types of investments (UNDESA, 2019) to ensure that financing is going where it is needed most. Today, despite the increase in a number of financial products claiming to be impact investments, there is no common ground on how to manage impact investments and clearly distinguish between impact investing, sustainable investing and other forms of responsible investing (World Bank, 2019).

However, while considered a distinct asset class, impact investment uses a range of traditional financial instruments including private equity, debt, and fixed income securities (UNDP, 2019)  

The 2018 paper on Impact Investment by World Economic Forum provided some criteria to differ impact investment from sustainable investment, where the former refers to any investment that intends to produce a measurable positive social or environmental outcome as well as a financial return, whereas sustainable investing is a broader approach, incorporating environmental, social and governance (ESG) factors into investment decisions but prioritizing financial return while not necessarily intentionally creating and measuring the social or environmental impact.  

Impact investing – which consists of private equity and some specialty bonds such as green bonds -- has traditionally been the domain of the development institutions and specialist funds. But it is growing rapidly as investors look for ways to generate benefits for society alongside financial returns. The impact market expanded fivefold between 2013 and 2017, reaching $228 billion globally in 2017 (WEF, 2018) 

Conceptually, impact investment focuses on deliverables that are typically addressed by governments alone, i.e. public services and public goods. Today the impact investors tend to concentrate on: (i) basic needs sectors such as housing, energy, health, agriculture, access to finance (microfinance), (ii) meeting the needs of underserved or ‘bottom of the pyramid’ (BOP) customers that are typically overlooked by markets, (iii) technologically innovative business models to tackle the developmental challenges at scale. For instance, for instance, the UNDP, that is is one of five institutional stakeholders for the Addis Ababa financing for development follow-up process, provides a showcase of Kenya-based Bridge Academies International (BIA), an innovative business model developed to provide high-quality affordable primary and pre-primary education in Africa and India. BIA developed an “academy-in-a-box” franchise solution to providing low-cost education that delivers scripted lessons through cheap mobile technology. This allows the enterprise to provide poor families living on an average of US$ 1.60 a day the means to educate their children for around US$ 6.50 a month. The venture has grown to over 100,000 pupils today. (UNDP, 2018)

Developed economies seek to achieve impact in social innovation and environmental sustainability domestically, and even set a new benchmark in the paradigm of delivering public goods.  Recent EU policy paper on social impact investing argues that the current EU social policy innovation agenda, combined with the new modes of financing such as impact investment results in new forms of providing common and social goods: "instead of focusing on a top-down approach in the design of service delivery models, or on the direct provision of such services, the State shifts its focus to the actual outcomes those services" delivered by public or private providers. It changes the traditional paradigms of both the market and the public sector,- says the study. 

The OECD has published a new study, dedicated to Social Impact Investments and introduced the OECD Policy Framework on Impact Investments, which is used to map the existing public initiatives in support to impact investing both in the market and in development cooperation.  It also provides new insights into the global state of social impact investing market, suggests that it grows particular fast in developing countries, underscores the growing role of technologies and other trends such as the "growth of gender lens investing". This publication is a sequel to the OECD 2015 report on Social Impact Investment (SII), Building the Evidence Base, bringing new evidence on the role of SII in financing sustainable development. It depicts the state of play of SII approaches globally, comparing regional trends, and assesses its prospects, with a special focus on data issues and recent policy developments.  The study provides four sets of recommendations on financing, innovation, data and policy for delivering on the “impact imperative” of financing sustainable development.


Impact investing is a market with many moving parts. It brings together the public, private and social sectors as partners, collaborators and co-investors, and also sits across multiple government agendas. For impact investing to reach its potential, it must be considered from the perspective of all stakeholders. Policy-makers play a critical "multifaceted role” as market stewards, enablers and direct market participants, by providing the enabling environment needed for thriving multistakeholder engagement through the right model of policy ownership across government (assigning special mandates, interministerial task forces, etc) and developing engagement tools into the core of impact investing policy design (World Economic Forum, 2018) 

Please, see the World Bank Conference (video record, 1h:34 min) on: "Investing for positive Impact: What is need to scale up".    

By Katsiaryna Serada



SDWatch.org is an independent, non-profit and student-led project initiated and managed by students and alumni of the LL.M in Sustainable Development at the University of Milan. It is supported by the Department of Italian and Supranational Public Law of the University.