A 2023 report published by Dutch impact investment consultancy Phenix Capital Group, EU v US: Impact Investing Market, has revealed that Europe leads the US on the impact agenda with 33 percent more impact-focused funds and 44 percent more impact investors. But dig deeper into the data, produced from tracking more than 2,600 funds in Phenix’s impact database, and the picture is more nuanced.

That is because the divide between the two regional heavyweights exists mainly in the public markets sphere. Here, Europe has 71 percent more public equity impact funds than the US, and European investors allocate 86 percent more impact capital to public equity.

The gap is far less pronounced in private markets. There are 484 European and 450 US private equity impact funds; just a 7 percent difference. Those US private equity funds are also raising more capital for impact investing than their European counterparts at €76 billion and €65 billion, respectively, according to the report’s findings.

In the real assets sector, which includes infrastructure, Europe is again ahead in terms of the number of real assets impact funds in market – 39 percent more than the US.

America’s philanthropic generosity is cited in the report as a potential reason why the country’s capital allocators seem less inclined than their European counterparts to commit more to impact investing.

With charitable giving providing generous tax breaks in the US, investors prefer to maximise profits and then give money to charity, the report suggests.

Emerging market caution

Funds in both countries have an overwhelming preference to impact invest in their home markets, followed by each other’s.

However, when it comes to investing in emerging markets, there is a marked divide between the two regions, with European funds more confident in embracing impact opportunities in Africa than their US counterparts. Europe’s geographic proximity and historical connections to some emerging markets may explain the region’s greater comfort, according to the report.

Aligned on SDG priorities

European and US funds are, however, almost fully aligned on which UN Sustainable Development Goals are a priority, with those closely connected to infrastructure – affordable and clean energy, sustainable cities and communities, innovation and infrastructure – in the top five allocation targets for both regions.