Some 60 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.
The Operating Principles for Impact Management is a market standard for impact investing in which investors seek to generate positive impact for society alongside financial returns in a disciplined and transparent way. The principles bring greater transparency, credibility, and discipline to the impact investing market.
The organizations adopting the principles collectively hold more than $350 billion in assets invested for impact, which they commit to manage in accordance with the principles. Future investments for impact will also adhere to the principles. The principles provide a clear common market standard for what constitutes an impact investment, addressing concerns about “impact-washing.” IFC led the development of the principles, in collaboration with leading asset managers, asset owners, asset allocators, development banks, and financial institutions, including a three-month public stakeholder consultation.
“We believe there is now potential to bring impact investing into the mainstream,” said IFC CEO Philippe Le Houérou. “Our ambitions are very high — we want much more money managed for impact because there’s no time to lose to deliver on the billions to trillions agenda.”
In a new report, Creating Impact: The Promise of Impact Investing, IFC estimates investor appetite for impact investment could today be as much as $26 trillion. This includes $5 trillion in private markets involving private equity, non-sovereign debt, and venture capital, and as much as $21 trillion in publicly traded stocks and bonds.
To fulfill this potential, impact investing needs to offer investors a transparent basis on which they can invest their money to achieve positive measurable outcomes for society in addition to financial returns. The principles facilitate this process by creating clarity and consistency regarding what constitutes investments managed for impact to bolster confidence in the market.
IFC is the one of the oldest and the largest impact investors, demonstrating it is possible to achieve significant development impact while generating solid financial returns. On average, IFC’s realized equity returns from 1988 to 2016 compared well to returns from the MSCI Emerging Market Index.
The principles draw on IFC’s experience in investing in emerging markets to achieve strong development impact and financial returns. They reflect best practices across a range of public and private institutions. They integrate impact considerations into all phases of the investment lifecycle: strategy, origination and structuring, portfolio management, exit, and independent verification. Critically, they call for annual disclosure as to how signatories implement the principles, and independent verification of impact management systems, which will provide credibility to the implementation of the principles.
First Adopters of the Operating Principles for Impact Management
- Acumen Capital Partners
- AlphaMundi Group
- AXA Investment Managers
- Baiterek National Managing Holding JSC
- Belgian Investment Company for Developing Countries
- Blue like an Orange Sustainable Capital
- BlueOrchard Finance Ltd.
- BNP Paribas Asset Management
- Calvert Impact Capital
- Capria Ventures
- Cardano Development B.V.
- CDC Group plc.
- CDP – Cassa Depositi e Prestiti
- Community Investment Management
- Cordiant Capital
- Credit Suisse
- DEG – Deutsche Entwicklungs- und Investitionsgesellschaft mbH
- Development Bank of Latin America
- European Bank for Reconstruction and Development
- European Development Finance Institutions
- European Investment Bank
- FinDev Canada
- Flat World Partners
- FMO – the Netherlands Development Finance Company
- IDB Invest, Member of the Inter-American Development Bank Group
- IFC Asset Management Company
- IFU – Investment Fund for Developing Countries
- Incofin Investment Management
- Investisseurs & Partenaires – I&P
- Islamic Corporation for the Development of the Private Sector, Member of IsDB Group
- Kohlberg Kravis Roberts & Co.
- LeapFrog Investments
- LGT Impact
- LGT Venture Philanthropy
- MicroVest Capital Management
- Multilateral Investment Guarantee Agency
- Oesterreichische Entwicklungsbank AG
- Overseas Private Investment Corp.
- Partners Group
- Prudential Financial
- STOA Infra & Energy
- Swiss Investment Fund for Emerging Markets
- The Rise Fund
- The Rock Creek Group
- Zurich Insurance Group Ltd.