Little interest in impact investments: knowledge and trust are missing!

Little interest in impact investments: knowledge and trust are missing!

The demand for impact investments, which promise both financial returns and positive social effects, shows remarkable growth potential in Germany. Nevertheless, general awareness of such investment opportunities among private investors remains shockingly low. A current survey by the Department of Sustainable Finance at the University of Kassel, in cooperation with Consileon Frankfurt, EB-Sustainable Investment Management and Universal Investment, shows that only 14% of the private investors surveyed know the term 'impact investments'. This finding highlights a lack of information and education in an area that is crucial to the sustainable transformation of financial markets.

The survey also shows that over a third of respondents show interest in impact investments once they receive a detailed explanation. However, only 8% of those surveyed are currently actively investing in this form of financing. What is alarming is that 78% of participants do not feel sufficiently informed. Traditional banking advice remains the central source of information, but this highlights the need for a broader range of information and advice on these forms of investment. Trust in providers and transparency of impact are seen as crucial to the attractiveness of impact investments.

Growth and challenges in impact investing

A market report from ExtraETF highlights that the volume of self-declared impact assets in Germany was 38.9 billion euros in 2022. This includes both impact-compatible investments and impact-effective investments. The latter, with a value of 9.23 billion euros, aims to achieve a direct, measurable positive effect. In a global context, the volume of impact investing assets under management amounts to $1.164 trillion, further underlining the relevance of this market.

An important point is the differentiation between impact-compatible and impact-effective investments. While the former includes ESG-managed investments assessed by benchmarks, the latter aims at targeted investments in companies that pursue clear impact goals. This shows that the approaches in the area of ​​impact investing are diverse and require different strategic framework conditions.

The role of the financial sector and recommendations for the future

The financial sector plays a key role in the social-ecological transformation triggered by the Paris Climate Agreement and the UN Sustainable Development Goals. The DVFA Impact Expert Committee has published a comprehensive guide that is used to assess the effectiveness of impact investing and offers practical instructions for measuring impact. Michael Franz Schmidt from the DVFA emphasizes that there are different perspectives on the term 'impact', which leads to uncertainty in the market.

The DVFA guidelines set three conditions for generating impact: the intentional impact, the demonstrable impact and the net positive impact. In order to ensure a transformative effect of impact investing, the committee calls for a standardization of the perspective on impact creation. This is crucial to avoid impact washing and promote appropriate regulatory support for social and environmental goals.

Overall, the current discussion shows that despite the recognized potential of impact investments, there is still a significant need for information and action. Providers, media and educational institutions are called upon to communicate the benefits and opportunities of impact investments more clearly and make them more accessible. At the same time, politicians should create clear definitions and uniform labels in order to structure and strengthen the market.

Such measures are essential for the sustainable development of the financial market and investor confidence. This is the only way to pave the way for a sustainable investment strategy.