Kudos to impact consulting firm Tideline, which has published a guide to help new market entrants work out whether their fund is “impact”, “thematic” or something else. It matters, because investors (and increasingly regulators) want to know exactly how your fund will be making an impact.
In Tideline’s words, this is a “‘how-to’ for new market entrants who may feel overwhelmed by the range of industry standards, nomenclature and practices, and who want to understand where and how to start”.
“We are sharing the framework publicly with the goal of helping ensure market integrity in sustainable investment at a time of rapid, uncoordinated growth,” the report states.
“While many market participants may think of impact investing as a distinct strategy, our experience has shown that the key pillars of impact investing – Intention, Contribution and Measurement – can help distinguish among all approaches to sustainable investing, bringing the elusive goal of market standardisation within reach.”
Through a series of case studies, Tideline illustrates the difference between various types of sustainable or impactful strategies. An “impact” fund combines a high level of contribution (ie, active engagement as a shareholder to help the investee company increase impact) with a high level of intentionality (ie, selecting investment opportunities that all align to its stated impact objective).
The report notes: “In Tideline’s work we have found that when many asset owners say they are looking for investment opportunities with impact, they are not looking only for ‘impact investments’ narrowly defined, but at the much larger universe of ‘impact-focused’ products.”