The 9 Principles

The Impact Principles provide an end-to-end framework of best practices for investors in the design, implementation and continuous improvement of their impact management systems and processes, ensuring that impact considerations are integrated throughout the investment lifecycle. By aligning with the Impact Principles, investors are committing to a global standard on what it means to be an impact investor in “practice,” thereby improving investor confidence and integrity and elevating impact practices while also addressing concerns related to impact-washing. As a global standard, the Impact Principles provide a reference point against which the impact management systems of funds and institutions may be assessed. They also provide an important mechanism for transparency and accountability for impact management in the capital markets through the Principle 9 requirement for annual disclosures and periodic independent verification of an investor’s alignment with the Impact Principles.

Universal Applicability of the Impact Principles
The Impact Principles are applicable to all types of investors, including different sizes, asset classes, sectors, and geographies. The Impact Principles may be adopted at the corporate, line of business, fund, or investment vehicle level. The way in which the Impact Principles are applied will vary by type of investor. They may be implemented through different types of systems, each of which can be designed to fit the needs of an individual organization. The Impact Principles do not prescribe specific tools and approaches, nor specific impact measurement frameworks – instead, the Principles are designed to guide investors in the development, implementation and continuous improvement of their impact management systems and processes across the full investment lifecycle.

Benefits of adopting the Impact Principles
The Impact Principles provide a critical component of market infrastructure that is necessary for scaling impact with integrity. Disciplined impact management practice is essential for mobilizing capital with investor confidence and ultimately delivering impact outcomes at scale. Standard practice for impact management across global capital market enables market efficiency, comparability and advancement based on best practices and shared learning.
For All Investors

Best practice roadmap: Design and implement an IMM (Impact Measurement and Management) system that is aligned with global standards and stay up-to-date on best practices in the industry
Investor confidence: Enable systematic and informed decision-making for impact across the investment lifecycle from strategy design to exit Impact leadership: Demonstrate leadership and commitment to advancing impact practice by contributing to knowledge and field-building initiatives
Learning and collaboration: Access knowledge on IMM best practices via in-depth peer learning and collaboration opportunities
Peer network: Join a global community of like-minded investors committed to developing market best practices and building the infrastructure critical for scaling the impact investing market with integrity

For Asset Managers

Market credibility: Signal credibility to LPs/investors and peers, particularly during fundraising, by committing to alignment with the Impact Principles
“Walk the talk”: Back up claims of impact by embracing transparency and accountability via regular disclosures and independent verification

For Asset Owners and Allocators

LP-GP relations: Improve LP-GP relations on impact via better communication and a shared understanding of expectations for impact
Portfolio management: Ensure managers across different asset classes and impact themes are held to a common standard of practice

An Overview of the Impact Principles: English, Spanish, German

PRINCIPLE 1:

Define strategic impact objective(s), consistent with the investment strategy.

The Manager shall define strategic impact objectives for the portfolio or fund to achieve positive and measurable social or environmental effects, which are aligned with the Sustainable Development Goals (SDGs), or other widely accepted goals. The impact intent does not need to be shared by the investee. The Manager shall seek to ensure that the impact objectives and investment strategy are consistent; that there is a credible basis for achieving the impact objectives through the investment strategy; and that the scale and/or intensity of the intended portfolio impact is proportionate to the size of the investment portfolio.

PRINCIPLE 2:

Manage strategic impact on a portfolio basis.

The Manager shall have a process to manage impact achievement on a portfolio basis. The objective of the process is to establish and monitor impact performance for the whole portfolio, while recognizing that impact may vary across individual investments in the portfolio. As part of the process, the Manager shall consider aligning staff incentive systems with the achievement of impact, as well as with financial performance.

PRINCIPLE 3:

Establish the Manager’s contribution to the achievement of impact.

The Manager shall seek to establish and document a credible narrative on its contribution to the achievement of impact for each investment. Contributions can be made through one or more financial and/or non-financial channels. The narrative should be stated in clear terms and supported, as much as possible, by evidence.

PRINCIPLE 4:

Assess the expected impact of each investment, based on a systematic approach.

For each investment the Manager shall assess, in advance and, where possible, quantify the concrete, positive impact potential deriving from the investment. The assessment should use a suitable results measurement framework that aims to answer these fundamental questions: (1) What is the intended impact? (2) Who experiences the intended impact? (3) How significant is the intended impact? The Manager shall also seek to assess the likelihood of achieving the investment’s expected impact. In assessing the likelihood, the Manager shall identify the significant risk factors that could result in the impact varying from ex-ante expectations. In assessing the impact potential, the Manager shall seek evidence to assess the relative size of the challenge addressed within the targeted geographical context. The Manager shall also consider opportunities to increase the impact of the investment. Where possible and relevant for the Manager’s strategic intent, the Manager may also consider indirect and systemic impacts. Indicators shall, to the extent possible, be aligned with industry standards and follow best practice.

PRINCIPLE 5:

Assess, address, monitor, and manage potential negative impacts of each investment.

For each investment the Manager shall seek, as part of a systematic and documented process, to identify and avoid, and if avoidance is not possible, mitigate and manage Environmental, Social and Governance (ESG) risks. Where appropriate, the Manager shall engage with the investee to seek its commitment to take action to address potential gaps in current investee systems, processes, and standards, using an approach aligned with good international industry practice. As part of portfolio management, the Manager shall monitor investees’ ESG risk and performance, and where appropriate, engage with the investee to address gaps and unexpected events.

PRINCIPLE 6:

Monitor the progress of each investment in achieving impact against expectations and respond appropriately.

The Manager shall use the results framework (referenced in Impact Principle 4) to monitor progress toward the achievement of positive impacts in comparison to the expected impact for each investment. Progress shall be monitored using a predefined process for sharing performance data with the investee. To the best extent possible, this shall outline how often data will be collected; the method for data collection; data sources; responsibilities for data collection; and how, and to whom, data will be reported. When monitoring indicates that the investment is no longer expected to achieve its intended impacts, the Manager shall seek to pursue appropriate action. The Manager shall also seek to use the results framework to capture investment outcomes.

PRINCIPLE 7:

Conduct exits considering the effect on sustained impact.

When conducting an exit, the Manager shall, in good faith and consistent with its fiduciary concerns, consider the effect which the timing, structure, and process of its exit will have on the sustainability of the impact.

PRINCIPLE 8:

Review, document, and improve decisions and processes based on the achievement of impact and lessons learned.

The Manager shall review and document the impact performance of each investment, compare the expected and actual impact, and other positive and negative impacts, and use these findings to improve operational and strategic investment decisions, as well as management processes.

PRINCIPLE 9:

Publicly disclose alignment with the Impact Principles and provide regular independent verification of the alignment.

The Manager shall publicly disclose, on an annual basis, the alignment of its impact management systems with the Impact Principles and, at regular intervals, arrange for independent verification of this alignment. The conclusions of this verification report shall also be publicly disclosed. These disclosures are subject to fiduciary and regulatory concerns.