The Global Impact Investing Network (GIIN) has presented “core characteristics” of impact investing in a bid to establish clarity and pave the way for further growth of the market.
Speaking to delegates at an impact investing conference in The Hague on Tuesday, Amit Bouri, CEO and co-founder of the GIIN, said the characteristics had been developed to guard against the effects of disingenuous or mistaken marketing. “As the sector’s popularity grows, there will be some people who put an impact label on financial products that don’t deserve it,” he said. “Some may do so on purpose to profit from the ‘brand’, others simply may not know any better. “If we let this ‘impact washing’ become widespread, the brand will be diluted, and the whole industry will suffer from the ensuing scepticism.”
The impact investing market needed to grow with integrity to ensure “impact at scale” rather than just “capital at scale,” he said.
Sapna Shah, director of strategy at the GIIN, said: “Our priority is to set appropriate expectations and define practices in a way that is useful to an investor building or deepening an impact investing portfolio, to support greater participation from both new and experienced impact investors.”
There are four impact investing “tenets”, according to the GIIN: intentionality, evidence-based investment design, impact management, and “contribution to industry growth”. During a panel discussion on “impact washing” at the Impact Summit Europe conference, a delegate asked whether the risk of impact washing could be seen as “a necessary evil”, where the risk of dissuading more investors to engage with impact investing was perhaps the bigger danger.
The core characteristics of impact investing, according to the GIIN
Intentionality: This, said the GIIN, is “at the heart of what differentiates impact investing from other complementary practices that focus on avoiding harm or mitigating risk”. Impact investing was about actively setting out to “positively contribute to social or environmental solutions by establishing clear impact objectives and thorough strategies to achieve these goals ahead of execution”.
Evidence-based investment design: Impact investing, according to the GIIN, involved the use of empirical data and research from financial services and other disciplines, including social and environmental sciences, as “the basis and support to establish impact objectives and validate results”.
Impact management: Impact investors also needed to commit to measuring and managing an investment’s impact with a view to meeting the set objectives. The GIIN said this meant using “feedback loops” whenever possible.
Contribution to industry growth: “Impact investors share non-proprietary and non-private positive and negative learnings, evidence, and data so others can benefit from their experience”.