NEW YORK, April 21, 2020 /PRNewswire/ -- Tideline, an impact investing consultancy, today published a first-of-its-kind research report on impact management verification, titled: "Making the Mark: Investor Alignment with the Operating Principles for Impact Management." The full report is available at: www.tideline.com/verification.
The Principles were introduced in April 2019 by the International Finance Corporation (IFC), the private investment arm of the World Bank, and 60 founding signatories to "support the development of the impact investing industry by establishing a common discipline around the management of investments for impact." As of April 2020 there are now nearly 100 signatories representing investors across a range of asset classes and investment strategies.
Principle 9 specifically requires all signatories to independently verify and publicly disclose their alignment with the Principles, much like how organic food producers are required to complete a certification process before their products can earn the "organic" label. To meet the market demand for impact verification services, in early 2019 Tideline began developing a new specialized offering to assess the degree of investor alignment with the Principles.
To date, Tideline has completed 13 independent verifications for impact investors managing more than $70 billion in combined impact assets and representing an authoritative sample of the impact investing market. Based on the aggregated results of those verifications, the report provides a way to benchmark current investor practices while also putting a spotlight on specific areas for improvement.
"Verification is an essential part of holding impact investors accountable and ensuring that the impact investing industry scales with integrity," said Christina Leijonhufvud, Managing Partner at Tideline. "Our research shows that there is a growing market consensus around what it means to be an impact investor, driven by a stronger collective understanding about how robust impact management can help deliver the positive social and environmental outcomes that investors promise and beneficiaries demand."
Tideline developed a proprietary verification methodology and rating system to evaluate how impact investors are aligned with each of the Principles. Based on this approach, Tideline discovered that:
- Impact investors generally excel at articulating their impact intentions and have made significant strides to operationalize those intentions across their investment portfolio. Investors make their impact intentions clear by defining specific goals that are: aligned to the Sustainable Development Goals (SDGs) or another accepted standard; linked to measurable impacts; and credibly supported by the investment strategy (Principle 1). Many investors also use industry standards to assess each investment for its potential positive impact (Principle 4) and have processes in place to integrate impact considerations throughout the investment process in a consistent way across individual investments (Principle 2), though several still struggle with aligning staff incentive systems with the achievement of impact.
- Impact investors have work to do when it comes to engaging with investees to support the achievement of impact. While many investors have a well-reasoned articulation of their intended contribution, they often fall short in establishing robust evidence (Principle 3). Investors also have room for improvement in how they monitor unintended impacts and hold investees accountable for ESG or impact underperformance (Principles 5 and 6), and particularly struggle to consider the effects of their exit on the sustainability of impact (Principle 7).
- The impact investing market has broadened its focus from impact measurement to impact management. Effective impact investors recognize that impact management entails not only assessing and monitoring intended and unintended impacts, but also continuously looking for opportunities to make improvements (Principle 8). Independent verification (Principle 9) can help identify challenges and point to ways impact investors can enhance their impact practices.
The list of impact investors for which Tideline has completed an independent verification includes: BlueOrchard Finance, Calvert Impact Capital, CDC Group, European Bank for Reconstruction Development (EBRD), KKR, LeapFrog Investments, LGT Venture Philanthropy, Nuveen, PG Impact Investments, PG LIFE, and UBS.
On April 23, Tideline and ImpactAlpha are co-hosting a virtual event, "Making the Mark in Impact Management," to share more detailed results from the report and to discuss best practices in impact investing and impact management. To register for the event, please go to: https://www.eventbrite.com/e/agents-of-impact-call-no-15-making-the-mark-in-impact-management-tickets-102632669076.
Tideline is a majority women-owned consulting firm that provides specialized advice to clients developing impact investment strategies, products, and solutions. Tideline is also a leading provider of independent impact verification services to asset owners, asset managers, and enterprises. To learn more, please visit www.tideline.com.