April 12, 2019

What You Need To Know About The IFC’s Operating Principles For Impact Management

Bhakti Mirchandani (Contributor) | April 12, 2019 | Forbes

The International Finance Corp (IFC) estimates that investor demand for impact investing, or investing with the goal of environmental and social impact in addition to financial return, could be $26 trillion. This is over 50 times the Global Impact Investing Network’s most recent estimate for the minimum size of the impact investing market of $502 billion in assets under management. The estimated minimum size of the impact investing market doubled last year, and the IFC’s estimate of investor demand suggests that it could continue to grow rapidly.

To catalyze the impact investing market reaching its potential, the IFC spent the past year collaborating with leading asset managers, asset owners, development banks and other financial institutions to develop the Operating Principles for Impact Management, which offer investors clarity and consistency on what constitutes impact investing. Rekha Unnithan, who runs impact investing at leading asset manager Nuveen’s and advised on the drafting of these principles, believes that the principles will increase the transparency and accountability of impact investing, enabling investors to select and compare managers based on impact performance and by financial performance.” Creating a credible minimum threshold should address concerns about “impact washing,” or overstating the positive social and environmental characteristics of an investment for marketing purposes, and bolster confidence in impact investing. The Operating Principles for Impact Management are a broad-based way to bolster bespoke approaches to hold impact investing fund managers accountable, such as Spanish impact investment firm Gawa Capital structuring carried interest payments to vary based on social impact above a hurdle financial rate of return.

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