But first, a quick retrospective. The impact investing landscape underwent a substantial shift in 2023, marked by geopolitical turmoil and challenges due to high-interest rates and tighter project timelines. However, amidst these hurdles, 2023 showcased the power of policy and finance, exemplified by the Investment Readiness Assistance (IRA), strategically injecting resources where they were most needed. Looking ahead to 2024, let's explore five trends that may guide and redefine the impact investing industry.
1. Will 2024 see a comeback in tech venture/growth funding?
The financial turbulence of 2023 hit sustainable investing hard, especially in the tech venture and growth funding. European startups saw a significant 46% funding drop, declining from $40 billion in 2022 to $28 billion in 2023.
Despite gloomy macro outlooks for 2024, investors are leaning towards collaboration and focusing on clear winners to minimize risks. This shift leads to more significant overall investments but with a sharper focus on specific companies. The evolving landscape indicates that 2024’s tech venture and growth funding scene will balance caution and optimism as it adjusts to the aftermath of 2023. While reaching 2022 funding levels might be ambitious, an overall positive trend is expected.
2. Regulatory Frameworks, Disclosures, and Measurement
In the past year, navigating the regulatory landscape was like a jungle for many. Understanding, gathering knowledge, and implementing measures to comply were essential. Regulators engaged in discussions on sustainable investments and ESG, adding complexity.
Globally, we anticipate 2024 to be the year when regulators worldwide start adopting requirements. Many of these regulations, set to be in effect by 2025 and 2026, are pushing for disclosure. Corporates and asset managers are closely following global regulators as they finalize these requirements.
While it may take some time for all the regulatory details to fall into place, there is optimism that this disclosure-driven approach will lead to more reliable and comparable data, boosting confidence in sustainable investments.
3. AI: Just a Hot Topic?
AI made a big splash across various industries last year. Crunchbase singled out generative AI as the top seed-stage category receiving funding in 2023. In November, Google and BCG dropped a report pointing out that AI could potentially reduce global greenhouse gas emissions by 5-10% by 2030.
Undoubtedly, AI was the talk of the town in 2023, and there are signs that money will continue pouring into companies finding innovative ways to work with it. But here's the kicker: as more people engage in mainstream discussions, the realization is drawing that supporting AI requires finding clean and sustainable solutions to power it.
4. Impact Investing will have a new resonance amidst global elections
In the monumental year of 2024, a staggering 4 billion people, constituting nearly half of the global population, are poised to participate in elections within their respective countries. This marks a historic top, making it the largest election year ever recorded. Beyond mere political dynamics, these elections signify a crucial time in our collective struggle against inequality and environmental degradation.
Governments hold a pivotal position, wielding significant influence in regulating financial markets and shaping critical sectors that directly impact investors engaged in driving positive change. As the world undergoes an unprecedented political transition in 2024, impact investors find themselves standing at the crossroads, keenly attuned to the potential shifts and transformative opportunities that may emerge on the global stage.
The outcomes of these elections will undoubtedly have an impact on the impact investing landscape, shaping the trajectory of efforts to address pressing societal and environmental challenges.
5. What Will We All Be Talking About?
We're buzzing about sustainable energy solutions, focusing on Industrial Heat, Industrial Partnership, Electrification, and Repowering. There's a consensus that relying solely on solar and wind power isn't enough, and batteries can't cover all the energy gaps. Now, nuclear fission and fusion energy are stealing the spotlight, sparking conversations about a potential nuclear/geothermal renaissance.
Could this be the hot topic of 2024? As we navigate the shift to more sustainable energy, the chatter around nuclear solutions is gearing up to be a key focus, shaping discussions and initiatives in the coming year.
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