Impact Practices Weaker At Later Stages of Investment Cycle
Global, May, 14 2021 -
Impact management practices are often less robust at the later stages of the investment lifecycle, according to BlueMark, a provider of impact verification services.
It found this to be the case on the basis of aggregated data and insights from 30 verifications of investor alignment with the Operating Principles for Impact Management, which were launched in April 2019.
It said the investors in its sample typically excelled at establishing credible strategic impact objectives aligned to the UN Sustainable Development Goals (SDGs) and at assessing impact at the portfolio level.
Most investors in its sample evaluated potential – ex-ante – impact performance and environmental, social and governance risks in due diligence and subsequently monitored impact and ESG performance.
However, it said the majority still had room to improve on assessing their contribution to investees’ impact and on following up with investees on impact underperformance, among other areas.
BlueMark also said that verified investors struggled most to ensure impact endured at and beyond exit, and to consistently adapt their processes based on lessons learned.
BlueMark acknowledged that its sample was not random, with large investors and development finance institutions (DFIs) overrepresented relative to the broader impact investing market.
“However,” it said, “BlueMark’s clients more closely mirror the impact investing market with respect to asset class and target geography and they are likely more representative of signatories of the Impact Principles, where DFIs and emerging markets-focused managers are overrepresented.
“We believe our sample offers learnings applicable to the broader impact investing market, since many of BlueMark’s clients are pioneers and early adopters in impact investing, and we expect to report on a larger sample in future reports, as more verifications are completed.”
The provider has this year also launched a benchmark for tracking best practices in impact management, describing it as “first-of-its-kind”.
The benchmark includes three distinct categories that define the practices of leading, median and “learning” impact investors.
“The idea of a benchmark is essential to the continued institutionalisation and maturation of the impact investing market,” said Christina Leijonhufvud, CEO of BlueMark and lead author of its report.
“By establishing a shared consensus on best practices in impact management, we have created a valuable tool that we hope market participants can use to improve their own practices and to see where they stand against their peers.”
BlueMark is a subsidiary of Tideline, a majority women-owned impact investing consultancy. The Rockefeller Foundation is a founding investor in BlueMark.
The development of the Operating Principles was led by the International Finance Corporation. Today they count 129 signatories.