Impact Investing Principles

One of the key challenges for impact investors and philanthropists alike is measuring & reporting impact.

Investing in things that make us feel good or simply giving our money away to what we think are worthy causes is not enough. Given today’s environmental, social, and economic climate, we need to measure and then report the impact our capital is making to ensure we are being effective stewards of our wealth.

Measurement & reporting supports accountability; to all stakeholders, our investees, and our donees.

To support impact measurement, the Global Impact Investing Network (GIIN) developed the Operating Principles for Impact Management.

This post describes what the Operating Principles for Impact Measurement are and how they may be used by impact investors and philanthropists to measures & evaluate impact.

Operating Principles Overview

The Impact Principles provide a framework for investors to manage their impact investments, which means investments that aim to make a positive difference in society and/or the environment. This framework helps investors to consider the impact of their investments at every stage of the investing process.

The Impact Principles can be customized to suit the needs of different organizations and do not require any specific tools or approaches. The idea is that investors can learn from each other as they apply these principles.

The Impact Principles are useful for all types of investors, regardless of the size of their investment portfolios, the types of assets they invest in, or the sectors and locations they invest in. Investors can adopt the Impact Principles at different levels, such as at the corporate or fund level. They can also choose to apply the Impact Principles only to specific funds or investments.

Different types of investors may use the Impact Principles in different ways. For example, asset owners may use them to identify impact investment opportunities, while asset managers may use them to assure investors that their impact funds are managed in a rigorous way. It’s important to note that the Impact Principles do not require investee companies, funds, or assets to follow them.

The 9 Principles

Here are the 9 Operating Principles of Impact Investing:

1. Define strategic impact objectives – Investors should define clear, measurable and attainable impact objectives that align with their overall investment strategy. This means thinking beyond financial returns and setting specific goals for the social and environmental impact of their investments.
2. Manage impact throughout the investment lifecycle – Impact considerations should be integrated at every stage of the investment process, from due diligence to exit. This helps to ensure that impact is not an afterthought but is considered and managed throughout the entire investment lifecycle.
3. Establish a system to assess and report on impact – Investors should have a system in place to regularly assess and report on the impact of their investments. This allows them to track progress towards their impact objectives and make informed decisions about future investments.
4. Adopt a responsible exit approach – Investors should consider the long-term impact of their exit strategy and ensure that it aligns with their impact objectives. This means thinking about how the investment will continue to have a positive impact after they exit.
5. Ensure ethical and responsible governance – Investors should promote ethical and responsible governance practices throughout their investment portfolio. This means considering factors such as human rights, labor standards, and anti-corruption practices when making investment decisions.
6. Develop a diverse and inclusive workforce – Investors should promote diversity, equity and inclusion in their own organizations and throughout their investment portfolio. This includes promoting diversity among their own employees and encouraging portfolio companies to do the same.
7. Respect the rights of stakeholders – Investors should respect the rights of all stakeholders, including local communities, workers, and customers. This means considering the impact of investments on these groups and taking steps to minimize any negative effects.
8. Encourage the development of impact investing – Investors should support the growth of the impact investing industry and work collaboratively to drive positive social and environmental outcomes. This includes sharing best practices and collaborating with other stakeholders to promote impact investing.
9. Collaborate to maximize impact – Investors should collaborate with other stakeholders, including governments, NGOs, and other investors, to achieve greater impact. This means working together to address complex social and environmental challenges and driving positive change at scale.

How do we implement these principles?

The best way to implement the 9 impact principles into our investing practice is to tackle each one in succession. Since, we can’t support the development of impact investing without first defining what our impact goals are.

Integrating impact measurement & evaluation into our investment process can feel daunting at first. Doing so will involve quite a bit of discussion and documentation, and so this means extra work for staff and/or consultants. But, the process will become easier over time.

Because, once a strong impact investing framework is in place, it becomes much easier to refine the objectives and tactics over time.

Start with an Investment Policy

If you or your organization is wondering where to begin your impact investing journey, the best place to start is by defining your impact objectives within your Investment Policy. If you don’t already have a written investment policy, then gearing up to make impact investments is a great excuse to create one.

Once you have an investment policy in place that defines your values and your impact objectives, its becomes much easier to develop impact investing tactics to reach your goals.

Our Family Office

Our family office has experience creating Investment Policies Statements (“IPS”) that consider impact objectives. We begin the drafting process by helping investors clearly identify their values. These values will then inform our path towards the type of impact an investor would like to make.

Please contact us to find out more about how we can help your family reach your impact investing goals.