Introduction

The report examines how high-net-worth individuals (HNWIs) engage in impact investing aligned with the United Nations Sustainable Development Goals (SDGs). It highlights the growing importance of private capital in addressing the estimated USD 2.5 trillion annual SDG funding gap. The study focuses on understanding the dual expectations of impact and financial return held by wealthy private investors.

Literature and hypotheses

Existing literature presents two views on corporate social responsibility (CSR) and financial performance: one sees CSR as compatible with returns; the other sees a trade-off. Research suggests that while CSR does not consistently result in financial outperformance, it often aligns with neutral or modestly positive outcomes. The study proposes two hypotheses: (1) securities aligned with SDGs will receive higher portfolio allocations, and (2) investors will allocate more capital to SDGs perceived to generate higher financial returns.

Investors seek impact by aligning their portfolios with the SDGs

The study analysed data from 60 HNWIs in Toniic’s 100% Network. Findings show that 61.1% of portfolio wealth is invested in securities aligned with at least one SDG. Investors reported focusing on SDGs based on personal interests or values. SDG 11 (Sustainable Cities and Communities), SDG 17 (Partnerships for the Goals), and SDG 7 (Affordable and Clean Energy) were most represented. SDGs such as 14 (Life Below Water) and 5 (Gender Equality) were less funded.

Regression models confirmed that SDG-aligned securities had higher portfolio weights, with significance increasing as the number of linked SDGs rose. Portfolios typically supported six different SDGs, with some portfolios targeting up to 15 goals. Qualitative interviews confirmed intentional, theme-driven allocation strategies among investors.

Return expectations of impact investors

The second hypothesis was tested by assessing return expectations linked to individual SDGs. SDGs 17, 8 (Decent Work and Economic Growth), and 14 were associated with higher expected returns. Investors preferred SDGs where economic viability was clear, such as SDG 6 (Clean Water and Sanitation), SDG 7, and SDG 9 (Industry, Innovation, and Infrastructure).

Survey and interview data revealed that most investors sought market-rate returns alongside impact. Some aimed to demonstrate that impact and financial performance were not mutually exclusive, using their portfolios as evidence. Disappointment was reported where financial expectations were not met, despite positive social or environmental outcomes.

Data and methods

A mixed-methods approach was used, combining portfolio data (over 4,000 security-year observations), surveys, and 21 interviews. Investors came from 16 countries, with most portfolios containing around 30 securities. Public equity was the dominant asset class, and 81% of wealth was allocated to investments expected to deliver commercial returns.

Results

Quantitative analysis showed that investors favour SDG-aligned investments and allocate more capital to those with higher return expectations. Regression models indicated a positive relationship between SDG alignment and portfolio weight, and between expected return and SDG selection. A significant correlation (ρ = .303, p = .027) was found between SDG allocations and expected returns.

Discussion

The findings indicate that HNWIs value both impact and returns. While committed to sustainable development, they focus on financially attractive SDGs. This supports the business case for impact investing and suggests a need to improve the financial appeal of underfunded SDGs to attract more capital.

Limitations and future research

The study focuses on one investor group, which may limit generalisability. It also does not distinguish between impact-aligned and impact-generating investments. Further research is recommended on other investor types and more refined impact measurement.

Conclusion

HNWIs allocate capital to SDG-aligned investments with the expectation of achieving both impact and market-rate returns. While this supports financing for some goals, others may remain underfunded unless their financial appeal improves.