Turning surplus bread into pasta, or using tech to deliver healthcare in rural areas. These are just two of thousands of European business ideas making a real impact on people and the planet. While traditional venture capital may hesitate, dedicated impact investors are stepping in, valuing social and environmental outcomes alongside financial returns.

Billions are being mobilised globally for impact investments, including public funds and private capital. According to Impact Europe, a network for do-good investors, private direct and indirect investments reached €190bn by the end of 2024, more than double that of 2022. Worldwide, impact investments may be worth up to $1.57 trillion, according to the Global Impact Investing Network.

Those who invest for purpose over profit come in all shapes and sizes. Do-good investors have different risk appetites and focuses, backing everything from clean-energy schemes and affordable housing to firms improving access to healthcare or education. But they share one requirement: the impact of their money must be measurable.

Younger investors are increasingly forward-looking and determined to build a resilient, sustainable economy for the future.

AI: Friend or foe?

AI was one of the most debated topics at this week’s Malmö Impact Summit, where hundreds of impact investors — from foundations and pension funds to development banks, charities and wealthy individuals — gathered in Sweden.

In recent years, artificial intelligence has emerged as a powerful tool for scaling social initiatives — enhancing impact measurement, boosting efficiency, and targeting funding more effectively.

However, AI also requires a huge amount of energy, which comes as a climate trade-off for some impact investors focused on sustainability.

Data centres, the backbone of AI, already consumed around 415 terawatt‑hours (TWh) of electricity in 2024, or roughly 1.5% of global demand, according to the International Energy Agency. By 2030, global electricity use by data centres could more than double.

Conversations around how to mobilise AI and tech developments to serve people and the planet dominated many panels at the summit.

“There is a really emerging field that is also called ‘AI for good’, where you see AI-based or AI-related business models that can quickly analyse massive data volumes, and then also develop models that can create a direct and measurable social impact,” said Dr. Markus Freiburg, incoming chair in 2026 of Impact Europe.

AI technology is increasingly part of new initiatives. According to the latest figures from Dealroom’s latest State of Impact report, start-ups using AI technology to deliver affordable and clean energy are attracting the most investment, particularly those applying AI to energy trading and energy monitoring.

Trending sectors in impact investing

Globally, climate action-related projects have been attracting the most impact investments, according to the State of Impact report. Between 2019 and 2025, year-to-date, these have come to more than $234 billion (€203.2bn), although inflows have been slowing.

The field called ‘AI for Good’, using artificial intelligence in the various fields of the UN’s Sustainable Development goals, is seeing increasing interest, while businesses improving access to sustainable materials are also gaining traction among impact investors.

Affordable energy and the creation of sustainable cities have been the next two most attractive sectors in the past six years. Participants at the summit agreed that energy independence has grown to be one of the most sought-after sectors.

Impact investment areas that are struggling, on the other hand, include food security solutions and circular start-ups (new businesses that aim to cut waste, reuse resources, and help restore nature).

According to Freiburg, businesses in social fields, including “education, employment topics or health and care topics,” are also attracting significantly less funding.

Could defence ever qualify for impact investment?

There is an increasing conversation around a sensitive topic: whether financing defence could count as impact investment.

The most recent trends show an increased appetite “towards AI and towards defence tech, which are not natural in the world of impact investors”, said Freiburg.

Many participants agreed at the summit that tech which can be used in a war, even for defence purposes, should not be considered part of the impact investment sector. But others asked where the line should be drawn during a time of heightened geopolitical tensions, when the safety and well-being of citizens are at stake.

According to the State of Impact report, the impact investment sector “increasingly views sustainability and impact through the lens of national security, economic resilience, and independence”, marking a shift from what once was an agenda driven by environmental and social challenges and innovation.

Researchers noted that investments in sectors and companies working on the Sustainable Development Goals are declining in 2025, while peace tech and defence tech start-ups are gaining momentum.

Companies benefiting include those tackling supply-chain vulnerabilities in critical materials, which are essential for products such as cars and semiconductors. Some of these firms are using AI to help source these materials.

What are the challenges ahead for the sector?

Impact investing is on the rise, yet the sector still represents only a sliver of Europe’s financial firepower. Impact Europe estimates that impact investments make up just 2.5% of all assets on the continent.

At the same time, only 17% of the UN’s Sustainable Development Goals were on track in 2024, with more than €4 trillion a year still needed globally to meet them by 2030.

Freiburg points to the continent’s two biggest challenges — climate change and deepening social inequalities, alongside growing pressure on democratic institutions. Meeting them, he argues, will require Europe to tap into the full potential of its innovators.

Investor appetite is certainly shifting. There is “strong interest in getting more engaged in impact investing,” Freiburg said, with pension funds and family offices increasingly allocating capital to the field. But to scale this momentum, he believes de-risking tools will be essential.

One such tool is catalytic capital — funding used when a project carries strong impact potential but is too early or too risky for conventional investors. Catalytic capital can absorb losses, offer low-interest loans or provide guarantees, lowering the risk for commercial investors.

Momentum is building among Europe’s biggest institutional players, too. Pension funds in countries such as the Netherlands and France are exploring allocations of up to 10% of their portfolios to impact, Freiburg noted. For Impact Europe, this signals a growing acceptance of impact investing as the market moves into the mainstream.