OPERATING PRINCIPLES FOR IMPACT MANAGEMENT The Impact Principles are a framework for investors for the design and implementation of their impact management systems, ensuring that impact considerations are integrated throughout the investment lifecycle 11 . In 2019, IFC (World Bank Group) launched the Operating Principles for Impact Management, and then in 2022 it was handed over to the Global Impact Investing Network (GIIN) to strengthen the cohesion of impact measurement and management across the industry. By the end of 2022, there were 169 signatories representing 39 countries and US$510 billion in assets under management. Close to 90 percent of its signatories had published a disclosure statement.
The Operating Principles for Impact Management 12 are:
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Define strategic impact objectives, consistent with investment strategy: “The Manager shall define strategic impact objectives for the portfolio or fund to achieve positive and measurable social or environmental e ff ects, which are aligned with the Sustainable Development Goals (SDGs), or other widely accepted goals.” Manage strategic impact on a portfolio basis: “The Manager shall have a process to manage impact achievement on a portfolio basis. The objective of the process is to establish and monitor impact performance for the whole portfolio, while recognizing that impact may vary across individual investments in the portfolio.” Establish the Manager’s contribution to the achievement of impact: “The Manager shall seek to establish and document a credible narrative on its contribution to the achievement of impact for each investment. Contributions can be made through one or more financial and/or non-financial channels.” Assess expected impact of each investment: “For each investment the Manager shall assess, in advance and, where possible, quantify the concrete, positive impact potential deriving from the investment. The assessment should use a suitable results measurement framework that aims to answer these fundamental questions: (1) What is the intended impact? (2) Who experiences the intended impact? (3) How significant is the intended impact?” Assess, address, monitor and manage potential negative impacts: “For each investment the Manager shall seek, as part of a systematic and documented process, to identify and avoid, and if avoidance is not possible, mitigate and manage Environmental, Social and Governance (ESG) risks.”
Monitor the progress of each investment: “The Manager shall use the results framework to monitor progress toward the achievement of positive impacts in comparison to the expected impact for each investment. Progress shall be monitored using a predefined process for sharing performance data with the investee.” Conduct exits considering the e ff ect on sustained impact: “When conducting an exit, the Manager shall, in good faith and consistent with its fiduciary concerns, consider the e ff ect which the timing, structure, and process of its exit will have on the sustainability of the impact.” Review, document, and improve decisions and processes based on the achievement of impact and lessons learned: “The Manager shall review and document the impact performance of each investment, compare the expected and actual impact, and other positive and negative impacts, and use these findings to improve operational and strategic investment decisions, as well as management processes.” Publicly disclose alignment with the Impact Principles and provide independent verification of the alignment: “The Manager shall publicly disclose, on an annual basis, the alignment of its impact management systems with the Impact Principles and, at regular intervals, arrange for independent verification of this alignment.”
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11 They do not prescribe specific tools and approaches, or specific impact measurement frameworks. The expectation is that industry participants will continue to learn from each other as they implement the Impact Principles. (Operating Principles for Impact Management, 2022). 12 https://www.impactprinciples.org/9-principles
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