In response to growing concern about global issues, impact investing is in increasing demand, and has become essential in the view of many shareholders.
Likewise, for impact companies, given the increasing weighting of passive index investing in equity markets, without a specialised segment of the equity market focusing on impact equities, these companies would find it very difficult to attract capital on a large scale.
They would be starved of capital without the involvement of active managers specifically allocating assets to impact investments.
There is another factor that is required to empower impact investors and their capital (in addition to effective impact data collection and analysis): deeper engagement by fund managers with public companies in order to encourage those firms to align their practices and offerings with their clients' values.
To achieve this, the fund management industry is having to transition from the two-dimensional client profile consisting of risk and return to add a third strand of data relating to these client values.
As a result of relentless stakeholder engagement, including from NGOs, consumers, asset owners and fund managers, some companies have completely transformed their business practices.
This proves that fund managers can work together towards more effective engagement, and this has already started.
The transformation of one company can have a domino effect in its sector and create a virtuous circle of businesses constantly striving for higher standards of corporate behaviour.
Like in the US technology sector, interactive ecosystems of universities, angel and venture-capital investors, accelerators, incubators, regulators, NGOs, IDFs, foundations, charities, private equity and debt investors could support the founding of thousands of start-ups in other regions and sectors.
In the same way as in US tech, the most successful of those could feed the public equity markets via IPOs while public equity markets would reduce the cost of capital for companies along the value chain while enabling all types of investors to achieve attractive returns.
Given that the estimated resources needed to reach the UN's Sustainable Development Goals is at least $3trn and could be as much as $7trn, impact investing cannot reach the scale required without the involvement of public equities and the support of actively engaged stakeholders.
Private markets have been crucial and formative for impact investing, but the asset class has grown and now needs a bigger park to play in.
And its guardians, equity managers, must continue to build on work achieved so far, integrating impact data collection and assessment into their processes, getting to know their investors' value preferences and, most importantly, increasing engagement with companies to guide them to their shareholders' values.
Eli Koen is portfolio manager, emerging markets equities at UBP