Opinion: Michael Karbouris
The reported impact investing market keeps growing in Australia. The 2025 benchmarking study puts it at $157bn, up nearly eightfold since 2020, which on the surface sounds like good news.
But in a sharp and fair critique, Tim Pullen has pointed out that around 93% of that growth comes from green, social and sustainability bonds. As Pullen notes, these sit adjacent to impact investing rather than squarely within it: impact investing means capital deployed with the intention to generate measurable social or environmental impact, and a GSS bond does not, on its own, clear that bar.
Which means the headline number is misleading. If we strip out the instruments that wear the label without making a difference, a far smaller and far less reassuring number remains.
Getting this right is more than a quarrel over labels. It decides where capital actually flows. Doughnut economics captures well the set of interconnected crises that form what is sometimes called our meta-crisis: our world has breached seven of nine environmental planetary boundaries, and we fall short on every one of our social foundations.
The funding needed to begin reversing that decline runs to trillions a year. How we define impact determines whether intentional capital fills that gap, or only appears to.
The fight over additionality
Part of the confusion is that impact investment spans two kinds of additionality. One sits with the enterprise: does it genuinely help solve the problems we care about, the planetary boundaries and social shortfalls? The other sits with the investor: does the enterprise require more capital to sustain or grow the impact it is pursuing? Enterprise additionality and investor additionality are not the same, though the two are constantly blurred together.
Much of the dispute is over the latter question. Some treat investor additionality as the gold standard, the only honest line between real impact and marketing. I have heard others call it a death knell, the thing that tied the market in knots and stalled its growth because it is so hard, and so contested, to ever pin down.
Additionality in general is the right test, because without it, impact is all label and no substance. The trouble is that it has been treated as a purity contest rather than a practical filter. The market never unified around a cost-effective, repeatable way to demonstrate it, and in that vacuum the incentive is to pull the bar down just far enough to clear it. Few set out to damage the category, most simply want the label. But the cumulative effect is the same: a market where almost no one trusts the claim.
Meanwhile, the reverse is also true. A great deal of genuine impact never gets recognised as impact at all, because the enterprises creating it can raise capital from the broader market and see no reason to wear the impact label. Despite no investor additionality, the enterprise impact is real, the market just doesn’t call it that.
The family office bind
These issues have often surfaced in our discussions with family offices trying to allocate to impact. The intention is there and so is the capital. What’s missing is a reliable and credible way to act on it.
The comments are consistent. Every investment opportunity presents impact differently, so nothing is comparable. There is no efficient way to separate what’s real from what has been dressed up for the pitch. There is rarely the time to diligence each claim from scratch, and the reputational cost of getting it wrong is high.
So the capital ends up in silos. Philanthropy in one corner, ESG screening in another, the occasional direct deal off to the side, none of it adding up to a holistic impact strategy.
There is not a shortage of will or money for impact. It is the absence of a shared, credible way to tell real impact from empty marketing, applied consistently enough that an allocator can build on it.
That is an infrastructure problem, and it is solvable.
Rigour without the cost
One way through the impasse is to make enterprise additionality cheaper and easier to demonstrate.
Most allocation decisions don’t need an academic accounting of every single unit of outcome. They need conviction: does this investment credibly demonstrate enterprise additionality, yes or no? That’s a lower bar than perfect attribution and a much higher one than a generalised sustainability metric. Crucially, it should be able to be applied the same way every time.
A workable approach rests on three things. First, what the impact actually is: a specific claim rather than an exhaustive inventory. If your core focus is curing cancer, the carbon emitted through your electricity use is likely a secondary concern. Materiality means measuring what counts, not everything that can be counted.
Second, how the impact happens: a clear line through a theory of change, from capital deployed to outcomes and impact produced. Systemic investing deserves a nod here, a movement rightly pushing the field to think across whole systems. But the work to get this right remains critical at the enterprise level, the foundation where the causal line is most direct.
And third, how is it proven: real guarantees on measurement and verification, written into the investment agreements rather than left to goodwill. None of this needs to be expensive. It needs to be material, and it needs to hold up.
Why now?
What makes the need for new impact infrastructure urgent is AI, and this cuts both ways.
Used well, AI can spot the gap between what an investment claims and what it actually delivers, faster than any analyst working by hand. It is also collapsing in real-time the cost of the very thing that made additionality so painful to prove. The consultant-heavy assessment that once took months and a small fortune is becoming something you can run in an afternoon. That should be good news.
But in a fascinating piece of research, Psaros and Josel have shown that AI tends to default to the warm, agreeable language of corporate sustainability (they call is “algorithmic greenwashing”). It would rather confirm that impact exists than press on whether it really does. Put those two things together and the risk is obvious: cheap, fast, confident assessment built on loose foundations is greenwashing on steroids. We are now able to produce credible-looking impact verification at industrial scale, whether or not the impact is real.
In the end, AI mirrors the world that it learns from. Build rigour into impact and it inherits that rigour; leave it loose and AI will scale the looseness at a speed no human reviewer could ever keep up with.
The window to build that infrastructure is now. Good infrastructure that can surface credible impact in all its forms does more than tidy up a headline number. It is how we unlock more capital flows to impact, full stop. The sector has spent the better part of two decades arguing about definitions while the question that actually matters goes unanswered: how does an allocator consistently and at low cost build an impact portfolio they can genuinely trust? That is the work now.
About ImpactX Markets
ImpactX Markets is building the digital infrastructure needed to bring greater credibility to impact investing. Its platform, currently being developed, will enable investors to evaluate private market opportunities using consistent impact definitions, comparable metrics and independently assured outcomes.
ImpactX Markets is an initiative of Digital Finance Cooperative Research Centre (DFCRC), a participant in the Australian Government’s Cooperative Research Centres Program, with a mission of unlocking the significant economic potential of digital finance innovation for Australia by bringing together industry, government and research.