Impact Investing without Limits: International Opportunities for Australian Investors

by Norman Zhang, Chief Investment Officer, Terusha Ramchund, Responsible Investment Specialist, and Will Beresford, Manager of Philanthropy & Social Capital

The full text of this paper is available below. To download a PDF copy of this paper, click here.

The impact investing landscape is evolving rapidly, shaped by growing investor demand and the urgent need for capital to tackle global challenges. While impact investments aim to deliver measurable social and environmental benefits alongside financial returns, capital allocation remains heavily concentrated in certain regions. Despite the sector’s momentum, only 1% of global impact assets under management (AUM) are in Oceania , highlighting a critical gap—and a missed opportunity—for Australian investors.

This paper examines the trends, opportunities, and challenges shaping impact investing in Australia and makes the case for global diversification. It explores high-impact investment themes—such as climate change and access to basic needs—and how these align with international trends and capital flows.

Through a comparative analysis of domestic versus internationally diversified portfolios, we demonstrate how expanding investment horizons can enhance risk-adjusted returns, unlock greater impact opportunities, and drive long-term sustainable growth. We also identify the key barriers to international impact investing—including market access, information asymmetry, and the need for specialised expertise— providing insights into how investors can overcome them.

With the demand for scalable, high-impact investments accelerating, Australian investors must carefully assess their capital allocation strategies to achieve both financial success and meaningful, measurable impact. This paper serves as a guide to navigating the evolving impact investing landscape—helping ensure that capital is deployed effectively to optimise risk, return, and impact while driving long-term, sustainable change.

Section 1: The Impact Investing Landscape

The impact investing landscape has undergone substantial growth, with more investors focusing on generating positive social and environmental outcomes while achieving financial returns. According to the Global Impact Investing Network (GIIN), impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. As of 2024, over 3,900 organisations manage approximately $1.571 trillion USD in impact investing assets under management (AUM) worldwide, yet based on the GIIN’s recent survey results, only 1% of impact AUM are located in Oceania. This highlights a regional disparity in impact investing activity. Despite this relatively small share, 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%). This rapid growth in Oceania, however, suggests a concentration of investors focusing predominantly on domestic impact investing opportunities, which is increasing competition and potentially crowding the market. Koda Capital’s 2024 Rising Tide survey 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 bias. In contrast, the GIIN’s 2024 State of the Market Report finds that globally, investors have allocated 46% of impact AUM to international opportunities.

The Australian impact investing landscape currently experiences a gap between supply and demand, particularly in terms of the variety and diversification of available opportunities. While demand for impact investments continues to grow, the supply of suitable options remains limited. This gap is largely driven by the narrow range of impact investment opportunities, especially those outside Australia, which hinders investors from achieving both geographical and sectoral diversification. As a result, Australian investors often find themselves with fewer options to diversify their portfolios, resulting in concentration risk and the inclusion of less impact opportunities in the search for diversification. As the domestic market in Australia becomes increasingly saturated, there is a growing need for investors to expand their focus and explore international opportunities. Doing so would not only allow them to diversify their portfolios but also help drive meaningful impact beyond national borders.

Section 2: Thematic Focus Areas

Thematic focus areas are shaped by a combination of key drivers, regional dynamics, and the growing demand for solutions to global challenges.

Key drivers

The World Economic Forum’s 2025 Global Risks Report (WEF Risks Report) highlights the escalating environmental risks that are driving global concern, with four of the top five risks ranked by severity over the long term being environmental. These include extreme weather events, biodiversity loss, ecosystem collapse, and critical changes to earth’s systems, along with natural resource shortages. Pollution also ranks among the top ten global risks. In response to these challenges, there is a growing focus on investments that contribute towards alleviation of these risks, as well as the achievement of the United Nations Sustainable Development Goals (SDGs), particularly those related to climate action and clean energy.

The WEF Risks Report also highlights wealth and income inequality being perceived as the most central risk, playing a significant role in both triggering and being influenced by other risks. The increasing demand from younger investors is a further driver behind the growth of impact investing. Younger generations are prioritising investments that address real-world problems and contribute to the achievement of the SDGs.

Geographic Focus

• Global: Globally, impact investments are primarily focused on energy, housing, and financial services. The GIIN 2024 State of the Market Report shows that 21% of impact assets are allocated to energy, 14% to housing, and 14% to financial services, including microfinance. Looking ahead, there is an increasing interest in environmental themes, including climate action, the blue economy, and biodiversity. Trends reflected in the 2024 GIIN State of the Market Report indicate an 82% increase in allocations to Sustainable Development Goal 14 (life below water) and a 64% increase in allocations to Sustainable Development Goal 15 (life on land). Furthermore, the report indicates that a high proportion of investors plan to increase allocations to the energy sector.
• UK: In the UK, the demand for impact investments is broadening, particularly in areas like biodiversity and forestry, despite being small allocations within portfolios. The Impact Investing Institute’s 2024 survey points to a rising interest in climate change mitigation and adaptation, with strong demand for energy, financial services, and healthcare investments. Notably, European institutional investors are increasingly prioritising environmental-focused impact products. In addition, the role of investors in supporting emitters to reduce greenhouse gas emissions was highlighted, noting the inclusion of improver-type assets in impact strategies in an effort to support the adoption of decarbonisation strategies.
• Asia: Asia presents a more varied impact investment landscape. The GIIN 2024 Impact Investing in Asia Report indicates that investors in the region allocate a significant portion of their capital to financial services (38%), energy (22%), and healthcare (13%). The focus varies by subregion, with East Asia leading in energy investments, while South Asia and Southeast Asia have less allocation to the sector. Overall, there is increasing interest in healthcare, education, and information and communication technologies, especially as markets in East Asia mature.
• Australia: The Australian market continues to develop with Koda’s Rising Tide Report highlighting the key sectors invested in by for-purpose investors, including affordable and disability housing, sustainable agriculture, clean energy, education, and healthcare (see Figure 1). Conservation and biodiversity and financial inclusion, although highlighted globally and in other regions, have seen lower levels of investment in Australia.

Figure 1: For-purpose impact investors invest in many areas

Note: For-purpose investors refers to the surveyed Australian charitable, non-profit and philanthropic investors 

Source: Koda Capital, 2024 

Koda’s impact themes  

Koda’s impact themes align closely with global, regional, and domestic focus areas.

Climate Change & Environment: This is a primary focus globally, with a strong emphasis on renewable energy, climate technology, and the circular economy. Examples include solar and wind energy, climate technology innovations such as battery storage, as well as sustainable agriculture and waste recycling. 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. The opportunity set for biodiversity-focused investments is rapidly expanding as global awareness grows, with increasing demand for sustainable practices that not only protect ecosystems but also play a crucial role in climate mitigation and adaptation, by enhancing natural carbon sinks, promoting resilient ecosystems, and supporting the development of green technologies that help communities adapt to climate change impacts. 

Basic Needs: Across markets, there is a growing emphasis on addressing affordable housing, health and wellbeing, and sustainable agriculture. Koda’s focus on social infrastructure and agriculture aligns with these trends, aimed at providing essential services and facilities that support the well-being of communities and promote social and economic development. The healthcare sector 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.

Access to Opportunity: There is a global need for more investments in financial inclusion, education, and gender diversity, with significant opportunity to provide access to essential services for underserved populations. Koda’s financial inclusion and education themes align with these priorities, seeking to address gaps in access to capital and educational opportunities in emerging markets. Sub-Saharan Africa, South Asia, and Latin America, offer opportunities for impact investors to support microfinance institutions, digital banking innovations, and affordable credit solutions that can significantly improve access to financial services for underserved populations. Investing in education empowers individuals to improve their economic prospects, while focusing on gender diversity ensures equal access for women, helping to overcome social and economic barriers.

Koda continually evolves these themes, aligning with emerging trends, client preferences and global impact investment opportunities.

Section 3: Benefits and Challenges of Investing Internationally

Investing internationally creates significant opportunities for addressing global challenges while providing access to diverse markets and innovative solutions. By expanding beyond domestic borders, investors can tap into markets at various stages of development, each with unique social, environmental, and economic needs. This approach offers the potential for high-impact outcomes and diversification, as well as access to sectors and regions that may not yet be fully realised in the Australian market. However, international impact investing also presents challenges that must be navigated to unlock the full potential of these opportunities.

Benefits of Investing Internationally

Larger market with greater opportunities: By expanding the geographic scope of their investments, impact investors can access a broader range of impactful opportunities. International markets offer greater thematic diversity in areas such as renewable energy, financial inclusion, sustainable agriculture, and healthcare innovations. As the global population grows, for example in Asia where more than half of the world’s population is expected to reside by 2050, impact investors can leverage the increased demand for impactful solutions, allowing them to meet the evolving needs of this rapidly expanding region.

Potential for deep impact: Investing in emerging and developing markets presents opportunities to make transformative changes, especially in regions with underdeveloped infrastructure or limited access to capital. These investments can drive access to essential services like clean energy, education, and financial services. International impact investments, especially in underserved regions, have the potential to unlock systemic changes. For example, according to the GIIN’s 2024 survey, while developed market allocations grew at a compound annual growth rate (CAGR) of 29% over five years, allocations to emerging markets grew at a slower 8% CAGR, underscoring the untapped potential in these regions. Notably, 43% of investors indicated that they plan to increase their allocations to emerging markets. Furthermore, according to a 2024 survey conducted by Blue Earth Capital, Africa and Asia were identified as offering the greatest investment opportunities by over 60% of survey respondents.

Diversification: International investments offer valuable portfolio diversification, especially for investors already committed to domestic opportunities. Global markets often follow different economic cycles and policy frameworks, allowing investors to spread risk while achieving meaningful social and environmental outcomes. We discuss this further in the section on portfolio considerations and implementation, where we demonstrate that a globally diversified portfolio results in materially reduced volatility and superior risk-adjusted returns, benefiting long-term investment outcomes.

Challenges of Investing Internationally

• Barrier to market entry: Navigating international markets can be complex due to varying regulations, differing standards of transparency, and inconsistent market maturity. In some regions, there may be fewer vehicles specifically designed for impact investing, which can make it harder to find suitable opportunities. A 2024 survey conducted by Blue Earth Capital found that the majority of respondents cited a lack of tailored investment products as a key challenge within the impact industry.
• Information asymmetry: Access to reliable, transparent data on impact outcomes can be limited in certain international markets. The overall information landscape is less structured in emerging markets compared to more mature ones, making it more difficult to assess the true impact of investments. Some markets also require more in-depth due diligence, added costs related to currency fluctuations, or cross-border legal considerations, creating barriers to entry for many investors. The Impact Investing Institute’s survey of the UK impact investing market identified similar challenges, with interviewees highlighting the lack of suitable investment opportunities and insufficient transparency regarding the sustainability and impact of investment propositions.
• Limited specialised knowledge: Limited access to specialised knowledge and expertise can hinder investors from identifying and pursuing suitable opportunities. The Impact Investing Institute’s survey of the UK impact investing market emphasises the crucial role of advisors in helping clients understand and navigate the complex landscape of impact investing. This includes activities such as education, needs assessments, due diligence, and reporting. Without access to advisors with the necessary expertise, investors may miss valuable opportunities. In Koda’s Rising Tide report, a third of respondents cited being unaware of impact investment opportunities as the reason for not including them in their portfolios, while 13% highlighted that their advisers or fund managers do not offer them, underscoring the need for greater specialised knowledge and guidance in this field.

Section 4: Portfolio Considerations and Implementation 

Assessing the portfolio impact of global diversification

While allocating globally presents impact opportunities for investors, it also introduces a layer of complexity to portfolios. Perhaps the most important question is what effect (if any) expanding internationally can have on portfolio risk and return outcomes.

Utilising Koda’s proprietary portfolio modelling tool and employing our capital market assumptions derived from macroeconomic research, we have compared an Australian-only portfolio to one with an equivalent headline asset allocation but diversified across 50% Australian and 50% international assets. The outcome of our analysis is illustrated in Table 1 and Figure 2 below.

Table 1: Australian-only versus a globally diversified portfolio asset allocation

Source: Koda Capital, 2025

Figure 2: Portfolio Metrics: Australian-only versus a globally diversified portfolio over a 10 year period – include

Source: Bloomberg & Koda Capital, 2025

The outcome of our modelling highlights the portfolio benefits, with the globally diversified portfolio exhibiting marginally lower annual expected returns, but with materially lower risk (volatility) and superior risk-adjusted returns as measured by the Sharpe Ratio. Based on this analysis, and empirical evidence of historical returns in multi-asset portfolios, diversifying globally will improve long-term investment outcomes. 

Incorporating impact in portfolio construction approaches 

Once the decision is made to allocate to impact investments, the next key question is how to structurally execute that mission through asset allocation and portfolio construction decisions. Our experience working with institutions highlights that there are multiple approaches.

Separate impact allocation

A common approach we have observed is for allocators to segregate a (often smaller) percentage of the total portfolio for impact investments (the impact allocation), while the remainder is invested with a requirement for ESG integration at a minimum (the traditional portfolio). The traditional portfolio would typically be invested with its own asset allocation to meet risk and return requirements.

We have observed that the impact allocation is primarily responsible for delivering the organisation’s impact goals. Given that the impact allocation typically accounts for a smaller percentage of the total portfolio size, it is less diversified, built based on the opportunity set of underlying strategies, and typically has a less structured asset allocation approach.

Having a separate impact allocation is effective in achieving the organisation’s impact goals given its targeted nature. However, we note that there is a potential weakness in the lack of integration between the traditional portfolio and the impact allocation.

Impact sleeves within asset classes

A more integrated approach involves a single portfolio, with impact sleeves integrated into each applicable asset class. For instance, a certain percentage of investments within the equities or alternatives allocation may be specifically allocated to impact-focused managers.

While this approach solves some of the asset allocation integration issues outlined in the previous example, it forces impact allocations within certain asset classes, where achieving this goal in another asset class may be more optimal from an impact contribution, risk, or return perspective.

Total portfolio

Koda’s investment approach lends itself to perhaps the most sophisticated and yet holistic approach to portfolio construction, which is to take a total portfolio perspective.

This requires careful planning at the portfolio design phase, where the impact objective(s) are considered alongside traditional return and risk targets. As illustrated in Figure 43, the return and risk targets are typically key drivers that form the “base” strategic asset allocation (SAA) of a portfolio.

Figure 3: Base strategic asset allocation (SAA) of a portfolio

Source: Koda Capital, 2025

Using this as a starting point, the investor’s impact objective(s) are incorporated to refine the SAA and significantly inform the portfolio construction and manager selection process to reach an “impact integrated portfolio”. For instance, the investor may have three broad impact objectives: global decarbonisation, addressing housing inequality in Australia, and addressing basic needs in emerging markets. Based on an assessment of available opportunities, investors can then optimise impact in certain asset classes where the contribution or risk rewards are better and mould others to support or complement the objectives.

Table 2: Example impact objectives linked to portfolio implementation

Figure 4: Strategic asset allocation (SAA) of an impact integrated portfolio

Source: Koda Capital, 2025

This approach optimise outcomes for the impact goals of the portfolio alongside the traditional return and risk measures, starting at a very early stage of portfolio construction. For allocators to successfully adopt this approach, impact objectives need to be established at the investment strategy and governance phase, along with strong capabilities in asset allocation, portfolio modelling, and access to a wide pool of compelling impact investments.

Reporting and benchmarking

Assessing and tracking the social and environmental performance of investments can be complex. Challenges include:

• Lack of standardised metrics: While frameworks like IRIS+ and the United Nations Sustainable Development Goals (SDGs) exist, there is still a lack of universally accepted standards for measuring impact, particularly for social outcomes. For example, measuring the effectiveness of an education programme is more complex than measuring carbon emissions reduction. Allocators will often need to establish the key performance indicators and metrics before investing.
• Data collection and analysis: Establishing robust data collection and analysis systems can be resource-intensive, particularly for smaller investors. This includes collecting data from various sources, ensuring data quality, and analysing it effectively. Social impacts often take a long time to manifest, requiring long-term data collection and analysis. This can be challenging for allocators with limited resources or short-term funding cycles.
• Performance measurements against imperfect benchmarks: In addition to impact outcomes, the investment performance of portfolios will also typically be measured against benchmarks. Oftentimes, these will be traditional benchmarks that incorporate securities or industries that impact investors avoid or underweight in areas where there is an opportunity for outsized impact. The analysis of, access to, and selection of benchmarks become an important consideration, as incorrect selection can sometimes lead to poor investment decision-making or mission deviation from an impact perspective. In asset classes where there is no alternative to imperfect benchmarking, allocators need to be acutely aware of the types of scenarios where realised performance can deviate significantly from benchmarks and potentially include these within a set of “acceptable range of outcomes”.

Responsible exit  

Effective impact investing considers the lasting impact of an investment, including after liquidation. It is important to achieve a “responsible exit” structured to ensure that the liquidation of the impact investment is accountable to the communities being served and intentional about continuing the positive impact for society. Planning for a responsible exit, particularly for closed-ended investments, should start long before an actual divestment, both at the time of investing and during the investment phase. 

Conclusion

The international impact investing landscape is undergoing rapid transformation, offering investors a wide range of opportunities to address critical social and environmental issues. While Australia’s impact investing market is growing, it remains relatively concentrated, limiting the breadth of available investment opportunities. Expanding internationally allows investors to tap into diverse markets, scalable impact solutions, and new sectors that may not yet be fully developed in the domestic market.

This paper has explored thematic focus areas, portfolio construction approaches, and the benefits of global diversification, illustrating how impact investments can be integrated effectively into portfolios. The findings highlight that globally diversified impact portfolios not only reduce volatility and improve risk-adjusted returns but also may provide exposure to high-growth sectors such as renewable energy, financial inclusion, and climate technology.

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

By embracing international impact investing, Australian investors can contribute to meaningful change while enhancing the resilience and long-term performance of their portfolios. As impact investing continues to scale globally, it will be crucial for investors to remain informed, adaptable, and committed to achieving both financial returns and lasting social and environmental benefits.

References