Whilst the popularity of impact investing has increased vastly in recent years, the concept is not new. What started primarily in the purview of the public sector has emerged in the private sector through the rise of the microfinance sector and the effort to use private capital to expand financial inclusion in the world’s emerging markets. Since then, the concept has developed into a range of asset classes seeking to bring a private market approach to solving critical challenges of global development.

Instruments such as blended finance, which aim at enhancing partnerships between the public and private sector to maximise synergies while setting clear impact targets towards sustainable development, have proven to be successful approaches to mobilise additional financing from the private sector. Although the public sector still plays an essential role, private actors, particularly asset managers, insurance companies, or foundations, have stepped up to the plate. However, the annual SDG funding gap of USD 4 trillion proves that there is still ample need to scale up investments.

Most recently, the pandemic has demonstrated the need for coordinated action and partnerships across all actors to address global challenges. While the size of investments needed might seem overwhelming, it can be achieved through a structured collaborative approach between public and private actors.