As impact investing continues to grow, one of its most essential principles—additionality—is becoming a central topic of conversation. In simple terms, additionality refers to the idea that an investment has a positive societal impact that would not have occurred without the intervention of that capital. While it’s easy to focus on financial returns and measurable impact metrics like carbon reduction or jobs created, additionality raises a more profound question: Are these companies addressing problems that would remain unsolved without their innovation?
In a world facing challenges like climate change, inequality, and healthcare systems under immense pressure from population growth, resource shortages, and pandemics, additionality isn’t just a metric—it is about building companies that tackle society’s most urgent issues that traditional investment models don’t support.
Our role as investors is not just to sustain what already exists, but to create what should exist.
Why additionality matters in impact investing
The growth of impact investing is undeniable. According to the Global Impact Investing Network (GIIN), the impact investing market was valued at $1.164 trillion in 2022—a significant leap from $715 billion just two years earlier. While this increase is promising, it raises critical questions about the deployment of this capital: If these companies or initiatives would have existed without impact capital, can we truly call that an impactful investment? Additionality ensures that the investments we make aren’t just displacing other funding but are, in fact, enabling the development of new ventures where market forces alone aren’t enough to drive innovation.
Take healthcare innovation, for instance. While investments in sectors like digital health and telemedicine have gained significant attention, certain transformative healthcare technologies face persistent funding shortages. Technologies such as next-generation diagnostic tools for detecting diseases at an earlier, more treatable stage, or biotechnologies focused on eradicating infectious diseases, remain largely underfunded.
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