Evaluating investments has proven challenging over the past 10 years of impact and responsible investing growth. Considering the investment's diversity (sectors, levels of risk, expected returns) and the various existing approaches to measure social and environmental returns, it can be challenging for fund managers to sort through and make investment decision. Having a clear impact strategy, and consistently implementing it throughout your portfolio, is key as investors have become demanding on the robustness of the funds' impact framework. Alongside our investment advisory work, we enable impact and ESG fund managers to optimise their impact management (impact strategy, due diligence processes, data management practices, communication and reporting) and to provide support to their investees. We also provide external evaluations of impact performance, as well as independent impact audits of the fund processes so as to ensure consistency of approach and meet best practice.
What we offer
We provide support to fund managers all across the investment stages:
Our approach is based on our best practice publication The Good Investor and international standards such as the Impact Management Project, whilst also incorporating the Sustainable Development Goals. Fundamental to IFG’s impact approach is that it should be of greatest use to the organisation itself. Therefore, we focus on the practical adoption of new tools and systems, underpinned by guidelines, training and ongoing support. The result is that investment decisions can be made rationally, effectively and aligned with social value. Flexibility is also core to our approach as we ensure we understand our clients’ needs and culture so as to design the best approach for them.
Why improve your impact management?
The market is shifting towards a greater consideration of impact into investment and as a result, socially/environmentally focused funds are being created in ever greater number. To capture this trend, there is a need to prioritise the concept of impact within the team, both for analysts and for those involved in investment decision-making; and to integrate impact considerations in the investment process, from deal sourcing through to post-investment management.
Enable a more effective discussion on impact: Discussing impact is not simple. Traditionally, there is a much stronger expertise in financial analysis than impact in investment teams and it is critical to use simple and common language as well as transparent processes.
“Impact investment portfolios are generating a growing set of impact data and investors are increasingly looking to move from basic impact reporting frameworks to impact assessment that creates value for management.” J.P. Morgan
Create a balanced portfolio: there is a need to integrate impact results with financial results to enable complete view. By integrating both aspects during the due diligence and investment phase and then presenting the portfolio results clearly visuals, this will enable the portfolio to be balanced in alignment with the fund’s strategy.
Understand and improve the impact performance of your investees: Collecting impact data should prompt a reflection on how to maximise impact. It is a starting point to explore the limits in the impact and business model, which could in turn represent risks to financial performance.
“Measurement should only be done if, and to the extent that it will actually influence decision-making, and the cost of measurement is not excessive compared to the significance of that decision.” OECD
Set impact targets together with your investees.
Strengthen your relationship with your investees : Better understanding their impact model, the challenges they face, and supporting them to improve, will strengthen trust.
De-risk your investments by evaluating and acting on their impact risks, both at the pre-investment phase (through a social due diligence process) and periodically post investment.
Meet requirements to track social/environmental performance, against a backdrop of growing external pressure (e.g. due to changing norms, stakeholder scrutiny).