The October 2019 GIIN Investor Forum in Amsterdam consisted of leading impact investors gathering to discuss the latest trends in the sector
A central theme dominated the conference: impact management. While the topic is certainly not new, the urgency is. In part this urgency is driven by the increasing visibility the sector is attracting. New impact funds from leading private equity firms and glitzy events in the world’s trendiest capitals provide fodder to the press and public opinion to look from the outside-in for reasons to find flaws in the sector.
The increased publicity around impact investing also attracts calls for greater accountability. At the GIIN Forum a leading asset management company revealed intention from EU regulators to expand its Non-financial Reporting Directive and legislate impact reporting, which will undergo significant changes in the next 18 months. If passed, EU regulations on impact reporting may set new global standards, similar to what GDPR has been to data privacy.
While still a young sector, impact investing builds on impact management best practices from the philanthropic sector and an increasing number of new service providers are emerging to assist investors in their quest to measure and report. At a panel over breakfast, a top four accounting firm presented its services for auditing impact. While this type of service, because of its cost, is currently only accessible to large impact investment funds, it holds the promise of bringing the rigors of audit standards to impact management.
Fiduciary duty and impact: opportunity or obstacle
“We care deeply about the world our members will retire into. As investors, we contribute deeply to societal and environmental needs in a way that’s beneficial to our members." - Ross Piper, CEO, Christian Super
Impact as contextual: clarifying assumptions of impact
GIIN Forum participants engaged in side discussions about “context” and “investor contribution,” and their influence on impact. Indeed, most practitioners agree that impact is contextual: for example, an SME fund investing in Kenya and one investing in Sudan may both pursue impact strategies, but the outcomes will be vastly different because of the locations in which investments are made. Impact investors are advised to clearly declare their assumptions of impact to communicate the context in which their investments are made.
Contribution is a newer concept whereby investors can influence the impact of their investments by being activist investors and/or technical advisors. Contribution has now been integrated into the IFC’s operating principles for impact. The GIIN Forum provided ample space for investors to learn about the principles and explore how to integrate them into their processes.
Looking Forward
GIIN Forum participants explored more pioneering topics around impact. A Bermuda-based financial institution provides its investees financial incentives to meet and surpass their impact targets: the higher the impact, the lower interest rate investees pay to the bank. Asset owners and managers are starting to explore ways to tie the financial performance of fund managers to the impact they generate. And some pondered if financial performance is sufficient in determining the success of an impact investment: if an investment is financially successful, but falls short of its impact targets, is that really success?
“Our time is now! If we want to seize this turbulent moment, we need to be bold, and we need to be big. The time is now, to change our relationship to money, to change what it means to invest truthfully, time to change capitalism, for better systems, for a better world. All of us have a role to play in solving the climate crisis and solving inequality. Who will do it if we don’t? Our time is now, and we need to seize this moment together. ”
For those of us attending impact conferences around the world, it can be easy to sweep aside conversations on impact management as an old topic that never goes away. However, it is undeniable that a new sense of urgency has arrived bound to radically modify actions (not words) in the near future.