Achieving integrated impact and financial goals.

Dec 08 2021 · 5 minute read

Learning by investors, for investors.

Helping investors understand how the puzzle pieces of impact-financial integration fit together.

Asset managers can use integrated impact and financial data and analysis to move beyond screening to continuous improvement of impact. Many asset managers that seek to create positive impact conduct impact analysis primarily at the pre-investment or screening stage. They apply a negative impact screen (filtering out companies with socially or environmentally harmful practices) and a positive impact screen (allowing in only companies that pass a threshold of positive impact). Once prospective investments have passed both impact screens, asset managers typically make investment decisions and construct portfolios purely based on financial considerations. Beyond screening, few investors or lenders actively optimize both impact and financial performance simultaneously.

The Impact Management Project began in 2016 as a forum for building global consensus on how to measure, assess and report impacts on people and the natural environment. It was intended to be time limited. The work enabled asset managers and investors to go further by actively optimizing for both impact and financial performance in portfolio construction and throughout investment decision making. Additionally, impact-financial integration enabled us as impact investors to communicate all dimensions of our goals and performance with greater clarity and transparency.

We collaborated on the logic and materials that The Impact Management Project developed on the different dimensions of impact and strategies to understand investor contribution. We teamed up with IMP on building an impact management process for a multi-asset portfolio, employing the IMP's framework to create selection criteria for investing to meet our integrated financial and impact goals. Back in 2018, we jointly shared this as a case study providing a framework and guidance for anyone seeking to map their product or portfolio by its impact on people and the planet: Building a impact management process for a multi-asset class portfolio.

The initial phase of work has now come to an end, as planned. The resources remain available for investors on the IMP website, and the work lives on as Impact Frontiers which is a peer learning and market-building collaboration, developed with and for asset managers, asset owners and industry bodies.

We are part of the first cohort of multi-asset class participants in this ecosystem-wide initiative to share knowledge and insights. We experiment with new approaches, share tools and experiences, learn from peers, benefit from thought partnership and advance impact management practice in the sector.

As a group, we are addressing four foundational questions.

This article draws on information shared in the Impact Frontiers "A Handbook for Investors." The Impact Frontiers Collaboration was convened and is led by Michael McCreless. The team have written a piece in SSIR "How Investors Can Integrate Social Impact With Financial Performance to Improve Both." You will find regularly updated resources for investors on the Impact Frontiers website.

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Jake Levy, Investment Manager at Snowball
Jake Levy, Investment Manager at Snowball