Impact Management | November 12, 2020

What the IFC learned about the state of impact management from 62 investors

Neil Gregory
Guest Author

Neil Gregory

One of the key features of the Operating Principles for Impact Management is that they require signatories to publicly disclose how their impact management systems align with the Principles. This brings a whole new level of transparency to impact investing – long criticized for offering investors a black box labeled “impact” and raising concerns about “impact-washing.”

So far, 75 signatories have posted their disclosure statements at www.impact principles.org, allowing anyone who is interested to learn how they invest for impact.

The Washington Post TV review section used to say, “We watch so you don’t have to.” We know that most investors don’t have time to read all the disclosure statements. So, we read the first 62 reports that were published by August. What did we find?

Most importantly, we found that signatories were generally quite thorough in their disclosures of how they align with each of the Principles. While there is variation, overall these documents give a detailed understanding of how these investors manage money to achieve real impact, making impact investing a black box no more. Many of the signatories are managing other people’s money, so this transparency is especially important.

We find strong support for anchoring target impacts in the globally recognized UN Sustainable Development Goals (SDGs), referenced by 85% of disclosures. The most frequently cited SDGs are Decent Work and Economic Growth; Gender Equality; Reduced Inequalities; No Poverty; and Climate Action; Industry, Innovation and Infrastructure. Five years since their launch, the SDGs have become the primary reference point for social and environmental impact.

Encouragingly, we see convergence towards common metrics to measure impact. 58% of disclosures report using either the indicator set managed by the development finance institutions (HIPSO) or the one managed by the Global Impact Investing Network (IRIS+) – sets which are themselves over 90% aligned. Asset owners have long been calling for the industry to coalesce around a common core of impact metrics, and we now see a great opportunity for this to happen.

We also see good progress towards combining the pursuit of positive impact with the effective management of Environmental, Social and Governance (ESG) risk. 95% of disclosures report the use of a systematic process to assess and manage ESG risk. Nearly half use the IFC Environmental and Social Performance Standards, and another quarter use a different international standard. 

At the same time, the disclosures show opportunities for improvement going forward. Only 56% of disclosures confirm that incentive systems are in place to reward achievement of impact alongside financial returns. In addition, few signatories attempt to compare the scale of their impact to the size of the environmental or social goal they are trying to contribute to achieving.

As expected, there is variation in how signatories are obtaining independent verification of their impact management processes. Those that have selected an independent verifier use a mix of Big Four accounting firms, specialist consultancies, and internal audit functions. But many disclosures did not say who would do the verification or how often it would be done – reflecting that many signatories are still trying to figure out how best to do it.

Also, only 58% of the 62 signatories reviewed completed verification in the first year, with the remaining 42% expecting to do so in the next year or two. The introduction of independent verification is an important innovation for the impact investing industry, so exploration of different processes is expected. We see differentiated approaches as a good sign that the industry is evolving, and investors are learning what works best for them. We expect to see greater convergence on verification over time, as signatories gain more experience and best practices emerge.

Since we finished reading these statements, 14 more disclosures have been published, and so public knowledge about the practice of impact investing continues to grow. Since the launch of the Principles in 2019, we have seen how the signatories are learning from each other and are eager to converge on good practices in implementing the Principles.

In a survey of signatories, 96% said that they had found the exercise of preparing the disclosure statement valuable, and 84% expected to find the statement valuable for their staff, investors and other stakeholders. We hope that these disclosure statements – and the accountability and transparency they provide – will make important contributions to this learning process.


Neil Gregory is a chief thought leadership officer of the International Finance Corporation, the private investment arm of the World Bank Group