Operating Principles for Impact Management (the Principles) describe the essential features of managing investment funds with the intent to contribute to measurable positive social or environmental impact, alongside financial returns. This goes beyond asset selection that aligns investment portfolios with impact goals (for example, the SDGs), to requiring a robust investment thesis of how the investment contributes to the achievement of impact.
The Principles have been designed from the perspective of an end-to-end process. The five elements of this process are: strategy, origination and structuring, portfolio management, exit, and independent verification. The nine Principles that fall under these five main elements are the key building blocks for a robust impact management system. As such, they aim to ensure that impact considerations are integrated into investment decisions throughout the investment lifecycle.
The Principles may be implemented through different impact management systems and are designed to be fit for purpose for a wide range of institutions and funds. Also, a variety of tools, approaches, and measurement frameworks may be used to implement the Principles. The Principles do not prescribe which impacts should be targeted, or how impacts should be measured and reported. They also complement other industry initiatives, such as IRIS, and green/social bond principles, which seek convergence towards common approaches to impact measurement and reporting.
OPERATING PRINCIPLES FOR IMPACT MANAGEMENT
The Principles were developed by IFC, drawing on its own impact management practices, and consulting with a range of asset owners, asset managers, asset allocators, multilateral development banks (MDBs), and development finance institutions (DFIs), including the collaborating institutions listed in this guide. The Principles draw on emerging best practices across a range of public and private institutions that are investing for impact. These include MDBs and DFIs that have both financial and development impact objectives, and decades of experience investing for impact in emerging markets.
The Principles also draw on the more recent experience of specialist impact funds and asset managers that have developed robust impact management systems. In addition, they build on industry-wide initiatives around impact management, including the Impact Management Project (IMP).
The Principles are intended to be a reference point for investors for the design and implementation of their impact management systems. They may be implemented through different types of systems, which are designed to be fit for purpose for different types of institutions and funds. They do not prescribe specific tools and approaches, or specific impact measurement frameworks. They do not provide guidance on how they are to be implemented. The ambition is that industry participants will continue to learn from each other as they implement the Principles.
Each asset owner and asset manager would align their management systems to the Principles. However, the manner in which the Principles are applied will differ by type of investor and institution. Asset owners and asset managers may apply the Principles to the relevant parts of their portfolios. For example, asset owners and their advisors may use the Principles to screen impact investment opportunities. Asset managers and their advisors may use the Principles to assure investors that impact funds are managed in a robust fashion.