After a bleak period for impact investing, parts of the sector are rebounding in Asia following the Iran war, with higher oil prices opening the door to renewable energy investments in the region.

Small base, big growth

Asia’s growth potential for impact investing is significant, albeit from a relatively small base. The region has historically lagged North America and Europe due to investor perceptions that prioritise philanthropy over commercially-driven impact funds.

As a result, Asia is historically only a fraction of the global impacting investing market, with just 7 per cent of worldwide assets under management. But the region’s contribution to the US$1.57 trillion market has grown by 60 per cent over the last six years, according to data from IIX Global. 

Matta said that Asia’s small base for impact investing is partly explained by “rationality and pragmatism.”

“When the environmental, social and governance (ESG) wave was high in North America, Asia was still focused on fundamental investing. We never really saw that boom in this part of the world — so we’re not really seeing that bust.”

Marco Serena, chief sustainable impact officer at Private Infrastructure Development Group (PIDG), an infrastructure development and finance organisation funded by six governments, said impact investing has become more strategic amid geopolitical tension.

Key growth areas include electric mobility and renewable energy, while carbon markets continue to lag, he said. Serena added that if voluntary and compliance carbon markets were to merge, the sector could see a “big acceleration” in investment.

He also noted that now could be a favourable time for impact investment in Southeast Asia, as the region remains relatively stable in a volatile global environment.

True impact investing

While capital continues to flow into impact projects in Asia, debate persists over what qualifies as impact investing — and how it should be measured.

Steve Okun, who was previously head of public affairs for investment giant KKR and now runs consultancy APAC Advisors, says that real impact investing forsakes some returns for impact – or else is just conventional investing.

He suggests the sector may be smaller than reported due to “impact washing,” where firms label investments as impact-driven without delivering meaningful additional social outcomes beyond what would have happened anyway.

ABC Impact head of investor relations Jeffrey Fang doesn’t see the industry that way. “If you’re just doing good but you’re not making any returns, then you’re a charity,” said Fang, who points out that Temasek invests in companies that can deliver market-rate returns.

Serena of PIDG said impact investing is not only about accepting lower returns, but also about “more patience with capital” and a longer-term investment horizon. “These two things together have a cost,” he said, requiring a more deliberate approach.

Naina Batra, CEO of social investor network AVPN, said standardised metrics are essential for the sector’s growth and to reduce impact-washing.

She also highlighted a shortage of fund managers and advisors with impact expertise as a barrier in Asia, adding that more success stories and unicorns are needed to attract broader investor interest.

She cited companies such as Khushi Baby, a decade-old digital health non-profit tracking maternal and child health in rural India, and Niramai, a breast cancer screening technology firm, as examples of successful impact ventures that have scaled in large markets.