Global investment firms adopt IFC principles seeking a market standard for impact investing



ImpactAlpha, April 15 – Sixty investors and institutions managing $350 billion in assets invested for impact adopted the nine operating principles for impact investments laid out by the International Finance Corp, a member of the World Bank Group, on Friday. The commitment to the principles “will bring much needed discipline, transparency and credibility to the market,” said the IFC’s Philippe Le Houérou at the launch in Washington D.C.

The principles include defining strategic impact objectives, managing impact, monitoring the progress of each investment and exiting with considered effect on sustained impact. Signatories will have a year to disclose how their investment practices stack up to IFC’s principles (Private-equity giant KKR, for example, tapped impact strategy firm Tideline to review its systems). Firms are required to provide annual verification of impact management systems.

“Investors are craving this kind of discipline,” said Le Houérou. In a separate report, the IFC said the untapped market for impact investments could be in the trillions.

  • Hybrid strategies. Legacy investment firms and financial institutions with impact investing offerings signed up to the principles, including KKR, TPG Growth’s Rise Fund, Nuveen, Partners Group, Prudential, UBS and Credit Suisse. The pledges commit the investors to only align their “impact” assets. KKR, for example, confirmed to ImpactAlpha that it will align only its (yet undisclosed) impact assets under management. TPG Growth signed up only its impact fund, the Rise Fund.
  • 100% impact adopters. Signatories include more than 15 development finance institutions, as well as impact investment managers including Acumen Capital Partners, BlueOrchard Finance, Calvert Impact Capital, Capria Ventures, LeapFrog Investments, MicroVest and responsAbility. “I am very pleased to see IFC putting their voice behind impact principles,” says Will Poole of Capria Ventures, an IFC investee. First-time impact funds may initially struggle to meet all nine principles, says Poole. “Unrealistic expectations could be the biggest hurdle in implementing the IFC’s principles.”
  • Impact cred. The IFC’s Le Houérou said the pledge will help prevent ‘impact washing.’ “Investors sometimes wonder if their impact investment was actually living up to its name,” says Le Houérou. “Now, they can be sure.”

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