A collaborative learning programme supporting investors to pioneer new ways to integrate impact alongside financial risk and return in investment practices
In current investment practice, financial and impact performance are mostly assessed separately rather than in comparison to one another. This lack of integration leaves impact and / or money on the table.
To address this opportunity, in 2018 Impact Frontiers launched a two-year learning cohort with twelve investors dedicated to advancing their impact management practices in a way that is fully integrated with financial risk and return – both conceptually and in their systems and processes. The lessons from this collaboration will be developed into practical guidance that will be made available as a public good in 2020.
Investors in the cohort are undertaking a structured process to develop answers to common-sense questions that any investor faces:
- Which investments create more or less negative and positive impacts on people and planet – and how do we know?
- Which investments offer the greatest risk-adjusted financial return?
- How can we use insights about impact and financial risk and return to inform decision-making on individual investments, and to improve the impact and/or the financial performance of our portfolios as a whole?
After collecting data and conducting analysis to determine the answers to these questions for their specific organisation, participating investors develop tools and policies to put their insights into practice, enabling them to:
- Benchmark prospective transactions against those already in the portfolio or under consideration, from both an impact and a financial perspective
- Take stock of existing portfolios from both an impact and financial perspective, and decide where to increase or decrease capital allocations
- Set integrated goals for impact and financial risk and return across a portfolio
- Codify the intuitive or tacit knowledge of founders and long-tenured investment team members
- Communicate more clearly about goals and performance – both impact and financial – with team members, investment committees, and with boards of directors.
Impact Frontiers is a public good initiative being incubated within the IMP. It originated at Root Capital and is supported by a group of generous funders: