The Global Impact Investing Network (GIIN) and IFC, a member of the World Bank Group, announced they plan to transfer the host of the Secretariat for the Operating Principles for Impact Management to the GIIN.
- The Secretariat for the IFC Operating Principles for Impact Management are to move to the GIIN.
- Alignment of the process of impact management with impact metrics, benchmarking and other parts of the impact ecosystem suggest a rapid maturing of the impact investment market.
- There is a groundswell of interest in impact investing as long term thinking about the consequences of actions and activities becomes more widepsread in both investment and corporate operations.
The Impact Principles are the impact investing industry’s framework for the design and implementation of impact management systems for investors, ensuring that impact considerations are integrated throughout the full lifecycle of an investment. Now they will find a home with the GIIN.
Amit Bouri, co-founder and chief executive of the GIIN said: “We’re really excited as it really helps to reinforce our role as the market leader in driving scale and effectiveness in impact around the world. It allows us to offer a more comprehensive offering – a one stop shop for investors on how to achieve impact.
Recognition of the importance of impact in investment is growing rapidly
In terms of the current ESG debate on financial materiality in terms of enterprise value (as with the ISSB) or longer-term impact (as with the EU) Bouri says: “We see our role not as thinking about financial materiality (although that’s a great first step) but how to drive investment with a positive impact. We’re explicitly focused with investors who start with an objective, a positive goal that is then followed through with a measurement.”
While as an investor coalition the GIIN doesn’t have a position on the reporting standards currently under development for corporates, it is interesting to see the increasing breadth of interest in impact investment, in terms of ensuring that investment is conscious of the impact that capital can have and the importance of ensuring positive environmental and social outcomes as well as investment return.
“As demand for impact investing offerings skyrockets and regulation emerges, growing alignment around industry standards will ensure that much-needed investment capital is being directed to scale up the most effective solutions and deliver the strongest results to address our world’s most urgent challenges,” said Bouri.
The numbers also reflect the expectations of the market. Overall, according to the latest analysis from the GIIN, impact investing has jumped 40% in the last two years now standing at over $1 trillion.
What are the Impact Principles about?
Since the framework’s launch in 2019, the Impact Principles have become the market standard for impact investors, deepening rigor and driving credibility within the financial services industry. The are a framework for impact management across a range of approaches. They can be used to guide how to embed/integrate impact into the development of an investment strategy, measure impact in a portfolio, how to embed impact in an in exit or an early liquidity event.
There are eight steps through which to embed impact into these different processes, with the ninth being to seek verification of the approach from the Secretariat. Those financial services companies which sign up to the Impact Principles must supply verification that they have implemented the Principles and publish a disclosure statement to the public.
The GIIN hosting the Impact Principles signals increasing market maturity
Bouri added that the announcement reflected an exciting time for the impact investment sector. He said: “It’s a strong signal about how the market is beginning to mature. As we bring the Secretariat under the GIIN it enables the Principles to work with other parts of the impact infrastructure. The market has a lot of interest in impact, and a desire for integrity – that is what the impact principles represent.”
What makes the GIIN a good home for the Impact Principles is the complementary nature of its framework. The GIIN operates the IRIS+ system, which is focused on the translation of impact intention to the development of specific impact metrics for measurement and is itself linked to over 50 other mainstream and niche standards and frameworks.
Moving beyond metrics it also provides benchmarks to enable investors to measure their performance against their peers, the GIIN has recently launched an initiative for the measurement of corporate impact investing.
Bouri added: “We are confident that impact investors and the signatories of the Impact Principles will benefit from having the generally accepted impact frameworks, methodologies, and benchmarks all in the same place.”
“The time is right for the hosting of the Secretariat to move closer to the market, and the GIIN offers that increased proximity to hundreds of market participants globally,” said Susan Lund, IFC Vice President for Economics and Private Sector Development. “IFC remains fully committed to impact investing and the Impact Principles and looks forward to supporting the GIIN whose strong expertise and experience will help take the impact practices to the next level of growth and integrity.”
History of the Impact Principles
Development of the Impact Principles was originally inspired by the GIIN’s March 2018 “Roadmap for the Future of Impact Investing,” an industry plan that included a call to “strengthen the identity of impact investing by establishing clear principles and standards for practice.”
The Impact Principles are managed by an independent Secretariat responsible to the signatories and operating at arm’s length from the host, including maintaining its own website. This arrangement originally launched at the IFC, will continue at the GIIN. The current Head of Secretariat, Diane Damskey, will continue her role to ensure a smooth transition, and operations will remain unchanged.
The Impact Principles were launched with 58 founding signatories, a number that has now nearly tripled to 163, spanning 38 countries and representing $470 billion in impact assets. As Bouri describes it, the Principles are a critical element of the impact ecosystem.