‘Impact investing is growing in name but shrinking in conviction: it’s time to focus on impact first’

In these challenging times impact investors should focus much more on impact first investing, here’s why. 

The global impact investing market has crossed US$1.5tn in assets under management — a number you’ve probably seen in no fewer than a dozen articles this year, each deploying it with the same breathless optimism. Over 3,900 organisations; 21% compound annual growth since 2019. By any measure, the sector has arrived. We are told this repeatedly.

So why does it feel like we’re losing ground?

In 2024, among repeat respondents in the GIIN's State of the Market 2025 survey, capital deployed into impact deals dropped 30% year over year — driven largely by bigger players retreating to safer, more mature investments. The 2025 data will likely reinforce this trend. The sector is growing in name while shrinking in conviction. And that gap — between the capital that claims impact and the capital that actually prioritises it — is exactly what this article is about.

Too much of our sector has quietly dropped impact from the top of the priority stack. It happened gradually – the path of slightly less resistance

I’ve worked in impact investing long enough to know that progress is not linear. The thinker Bayo Akomolafe describes progress as having a certain sloshiness — and right now, we are sloshing backwards. The systems impact investing was built to challenge are consolidating. Wealth is concentrating. And too much of our sector has responded by moving up-market, de-risking, and quietly dropping impact from the top of the priority stack. I don’t think that was a conscious choice for most managers and allocators. It happened gradually — the path of slightly less resistance. I’ve been guilty of it too.

But here’s what makes this moment different: the need for impact capital has never been more acute, and the sources we relied on to provide it are disappearing. USAID dismantled. US federal climate programmes defunded. The safety net fraying in real time. The problems impact investing was built to solve are not getting smaller — they are getting handed off to us, underfunded and urgent. At the same time, $90tn in wealth is set to transfer to a generation asking fundamentally different questions about what capital is for. The capital exists. The infrastructure exists. What has been in short supply is the willingness to put impact first — not as a filter applied after the financial return calculus is done, but as the starting point from which everything else follows.

• Read more: USAID shutdown ‘undermines global impact investing ecosystem’

That is what impact-first investing means. And this is exactly the moment to demand it.

The challenges facing our world do not get better through the further consolidation of power and capital. They get better when people with capital say: I have enough — how can I help? Across the ecosystem, from asset owners to fund managers to social entrepreneurs, each actor has made two decisions: (1) they want to help, and (2) they are willing to forego maximising their own return to do so. That thread connects all of us. But somewhere along the way it got harder to find. Social entrepreneurs — doing the hardest work, closest to the problem — increasingly feel disconnected from the $1.5tn that claims to be on their side. That disconnect is what happens when capital forgets to put impact first. So, let’s talk about what impact-first actually looks like for each actor.

• Read more: Impact-first ‘premium’ stands at $0.13 per dollar, but it is the price that must be paid – new Miller Center research

The allocator

Impact-first starts with a target outcome, not a target Internal Rate of Return (IRR). If you’re starting with a return hurdle and filtering for impact, you’re doing it in the wrong order. An impact-first allocator asks: how do I activate my resources — regardless of asset class — to best address the problem I care about? If climate is your focus, that question might look like: my goal is to accelerate the energy transition away from fossil fuels. What are all the points of intervention available to me? Go down that rabbit hole and you find the full stack: the C4 lobbying plays, the low-interest debt funds, the higher-yield solar developers. Each tool serves the same north star. The portfolio has a logic that isn’t financial — it’s causal.

The most underused idea in impact-first allocation is the target loss rate: if you’re not hitting it, that’s a signal of timidity, not success. It means your team should be taking riskier bets to move the needle faster. And when an investment fails, an impact-first allocator helps it fail with impact — winding down in a way that protects the people it served. Because impact-first isn’t a snapshot. It’s a philosophy that shows up the whole way through, including on the way out.

Impact-first is a philosophy that shows up the whole way through, including on the way out

Forty six per cent of global family offices are already backing impact deals, and they’re on track to manage $5.4tn by 2030. But family office impact assets under management is growing at only 14% annually — slower than pension funds and insurance companies. The capital is there. The interest is there. What’s often missing is the framework to move from “we want to do something impactful” to a coherent, impact-first strategy. That gap is where allocators need support — and where the rest of the ecosystem needs to meet them.

The manager

Impact-first asset managers occupy one of the hardest positions in finance. You build financial products to address an impact need, not the other way around. You fundraise from both investors and philanthropists, telling a story of leverage while maintaining an unwavering focus on the clients you serve. You make loans and investments that others won’t. You absorb uncertainty that allocators can’t and enterprises shouldn’t have to carry alone. You are the connective tissue of the ecosystem — and connective tissue, by definition, takes the most stress.

What makes this hard isn’t just the fundraising or the structuring. It’s the iterative nature of impact itself. Unlike a purely financial investment thesis, the set of interventions that will actually move the needle on a given problem is not an established equation. It requires building flexibility into your strategy so you can reorient toward impact as new information comes in — and having the humility to do so even when it’s uncomfortable. Choosing to “take less” — whether in fees, in carry, or in return expectations — is a real and ongoing decision. Let’s be honest: that margin comes from somewhere. Impact-first managers make that tradeoff consciously and repeatedly.

Choosing to “take less” — whether in fees, in carry, or in return expectations — is a real and ongoing decision

That’s why it is so damaging — and worth naming directly — when impact asset managers abandon their impact-first posture under pressure. I have seen it happen: a fund changes strategy abruptly when market conditions shift or quietly stops supporting investees the moment it becomes clear they won’t contribute to Distributed to Paid-In Capital (DPI). That is not impact-first. That is impact-of-convenience. And in a moment when the communities we serve are absorbing real shocks — from the dismantling of USAID to the rollback of federal climate programmes — fair-weather impact management is a betrayal of the whole premise. The managers who hold the line deserve to be not just celebrated — but capitalised.

The entrepreneur

At Open Road, we’ve made over 200 loans to social enterprises. The consistent thing I’ve seen is that intention matters. It is the foundation. But intention does not a business make.

In our investment committee, I ask every entrepreneur: tell me about a time you had to make a decision where there was a tradeoff between impact and growth. It sounds simple. It is clarifying. The entrepreneurs who answer it well — who can walk me through a specific moment where they chose the harder path or chose growth with their eyes open about what it cost — are the ones I trust most to steward impact-first capital.

The ones who give me pause say: our impact is perfectly aligned with our business model; we haven’t had to make any tradeoffs. I understand the instinct. In a fundraising environment where investors want to believe impact and returns are frictionless, that answer feels like the right one. But it’s a yellow flag. Not because tension is inherently good, but because the absence of acknowledged tension usually means one of two things: either the impact thesis hasn’t been examined closely enough, or the tradeoffs have been made without being acknowledged. Both are problems.

Being an impact-first entrepreneur means being ruthlessly honest about the small daily decisions — the ones where you chose growth over mission, or mission over growth — and owning them. It is OK to choose profit sometimes. Your business has to survive to have any impact at all. But it has to be a conscious choice, made with full awareness of what you’re trading. That honesty is what separates impact-first from impact-as-marketing.

The entrepreneurs who embody this are the reason the rest of the ecosystem exists. When the whole chain is working — allocators deploying with intention, managers absorbing uncertainty with integrity, entrepreneurs making honest tradeoffs — that is when impact-first actually moves the needle.

What’s next

So how do we get there? I want to be clear about something first: impact-first is not a gospel of scale. We do not bow at the altar of growth for its own sake. The goal is not to make impact investing bigger — it is to make it truer.

The goal is not to make impact investing bigger — it is to make it truer

And here is what gives me genuine optimism: the appetite is shifting. More high-wealth families than ever are voting with their dollars and approaching their financial advisors asking for impact-first and catalytic carve-outs. A new generation of asset holders is arriving with climate anxiety and inequality as defining features of their worldview. From my conversations across the sector, this is not a product problem — the vehicles exist. What is emerging, slowly but meaningfully, is a new baseline of expectations. The assumption that every serious investor should have an impact-first strategy is no longer a fringe idea. It is becoming the ask.

But assumptions don’t become norms without people willing to name them out loud and hold the line together. That is the work in front of us. Allocators, managers and entrepreneurs — each playing their role, each making the harder choice — need to stop operating as isolated actors and start functioning as a constituency. A voting bloc within the broader impact investing sector, with shared language, shared standards, and shared resolve. Not a side show that tolerates compromise while the main event optimises for return. The main event itself.

The capital is there. The need has never been greater. The entrepreneurs are doing the work. Now it’s time for the rest of the ecosystem to meet them where they are — and to do it with impact first, not impact eventually.

Caroline Bressan is CEO of impact investor Open Road Impact