Australian impact investors need to look beyond domestic markets to maximise both financial and impact potential, according to the latest whitepaper (Paper) by high net-worth advice firm Koda Capital.

The Paper ‘Investing without limits: Global impact investing opportunities for Australian investors’ highlights that despite the growing prominence of impact investments, regional disparities in capital allocation remain stark. As of 2024, over 3,900 organisations manage approximately $1.571 trillion USD in impact investing assets worldwide yet based on the Global Impact Investing Network’s (GIIN’s) recent survey results, only 1% of impact assets are located in Oceania[1].

Despite this, Oceania has seen the highest Compound Annual Growth Rate (CAGR) of AUM allocated between 2019 to 2024, at 62%, surpassing other regions such as the U.S. and Canada (38%), Western, Northern and Southern Europe (37%), and Southeast Asia (17%)[2].

Koda’s 2024 Rising Tide survey[3] further emphasises this trend, revealing that 57% of Australian for-purpose investors prefer domestic opportunities, with only 4% looking internationally, and 39% indicating no specific geographic bias3. In contrast, the GIIN’s 2024 State of the Market Report finds that globally, investors have allocated 46% of impact AUM to international opportunities[4].

Norman Zhang, Chief Investment Officer at Koda Capital

Norman Zhang, Chief Investment Officer at Koda Capital: “The rapid growth in Oceania suggests a concentration of investors focusing predominantly on domestic impact investing opportunities, which is intensifying competition and potentially crowding the market.

“By looking beyond domestic borders, investors can access markets at various stages of development, each with unique social, environmental, and economic needs. This strategy not only offers the potential for high-impact outcomes and greater diversification but also provides access to sectors and regions that are yet to be fully explored by Australian allocators.”

Mr. Zhang will discuss the Paper and Koda’s tailored approach to integrating impact across all asset classes in a keynote at the Impact Investment Summit APAC, taking place in Sydney on 26-27 March 2025. He will address an engaged audience of advisers, foundations, family offices, major super funds, and government institutions.

Portfolio impact of global diversification

Latest modelling by Koda Capital reveals that a globally diversified portfolio significantly reduces volatility (-116 basis points) and enhances risk-adjusted returns (+5.83 basis points), leading to improved long-term investment outcomes.

Terusha Ramchund, Responsible Investment Specialist at Koda Capital

According to Terusha Ramchund, Responsible Investment Specialist at Koda Capital: “By broadening the geographic scope of their investments, impact investors can access a wider range of opportunities with meaningful impact.

“Global markets provide greater thematic diversity in sectors like renewable energy, financial inclusion, sustainable agriculture, and healthcare innovation.

“Addressing climate change and environmental impacts is a worldwide challenge, and expanding into international markets allows us to contribute on a larger scale, for example technologies such as solar, wind, and waste recycling can be scaled and adapted to different environments, offering cost-effective solutions in diverse regions.”

As highlighted in the Paper, the healthcare sector also presents numerous opportunities for international impact investments, particularly in regions with unmet health needs. This could range from funding affordable healthcare access to supporting innovations in disease prevention or treatment.

“However, international impact investing also presents challenges, including regulatory differences, market access barriers, and data transparency issues. Navigating these challenges requires a structured approach to portfolio construction, robust due diligence, and access to a broad network of investment opportunities,” she added.

Navigating heightened geopolitical risks

According to Koda Capital, while the risks in investing into U.S. based impact investments may be heightened, progress in impact investing is continuing to thrive across Europe, Asia, Australia, and emerging markets, all of which are scaling their impact efforts.

Mr. Zhang believes that despite political and regulatory changes, the real-world challenges that impact investing aims to address remain ever-present.

“Impact investing will survive because, at its core, a good investment that is designed to solve for a critical need will always attract capital,” he said.

“While the future of policies such as the Inflation Reduction Act (IRA) is currently in flux, and   will have global ramifications, high-quality assets backed by reliable, steady revenues will stand the test of time. Renewable energy, for instance, continues to become more cost-efficient and effective, especially as innovation in storage technology evolves, and there remains strong demand for power generation.”

“Irrespective of the political climate, the fact remains that there are still populations eager for positive social and environmental change, market gaps that present unique opportunities for impact investors to help solve, investors prioritising impact who want to align their portfolios with their values, and other motivated market participants looking to unlock more capital for good,” he added.

Key impact themes highlighted in the Paper include climate change and the environment, with a strong emphasis on renewable energy, climate technology, and the circular economy. Basic needs, such as affordable housing, health and wellbeing, and sustainable agriculture, are also crucial areas of focus. In addition, the Paper identifies the need for increased access to opportunity, particularly through investments in financial inclusion, education, and gender diversity.

“Jurisdictions that are less impacted by geopolitics, such as the Nordics, which have a strong historical and cultural support for impact investing, present significant opportunities. Additionally, asset classes with strong secular tailwinds will continue to attract investor interest,” Mr. Zhang concluded.

Koda has partnered with international impact investment consultant, Tideline, to enhance the reach of its impact investment research, to support Australian investors in making impactful global investments that drive both financial returns and positive social outcomes.

View the full Koda Capital whitepaper here.

About Koda Capital

Koda Capital is Australia’s leading independent wealth management firm, providing conflict-free advice to high-net-worth individuals, families, and not-for-profits. With over $14 billion in funds under management (FUM), we deliver tailored investment and strategic wealth solutions that put our clients’ interests first. Founded in 2014, Koda has offices in Sydney, Melbourne, Perth and Brisbane, offering expertise across Investment Strategy, Philanthropy & Social Capital, Structuring & Tax, and Family Leadership. Our independence ensures we remain free from institutional conflicts, allowing us to provide objective, client-focused advice. At Koda, we are committed to delivering sophisticated investment opportunities, strategic insights, and long-term wealth solutions to help our clients achieve their financial goals. https://kodacapital.com/

References:

[1]Based on assets under management reported by 1475 organisations.  See Hand, D., Ulanow, M., Pan, H., Xiao, K. (2024). Sizing the Impact Investing Market 2024. The Global Impact Investing Network (GIIN). New York

[2] Based on impact assets under management reported by 71 organisations. See Hand, D., Sunderji, S., Ulanow, M., Remsberg, R., & Xiao, K. (2024). State of the market 2024: Trends, performance and allocations. Global Impact Investing Network (GIIN). New York

[3] Koda Capital (2024). Rising Tide: How Non-Profit & Philanthropic Investors Approach Responsible Investing.

[4] Based on 293 reporting organisations. See Hand, D., Sunderji, S., Ulanow, M., Remsberg, R., & Xiao, K. (2024). State of the market 2024: Trends, performance and allocations. Global Impact Investing Network (GIIN). New York