“Our co-investors’ due diligence questionnaires have started to revolve around our impact processes and measurements over the last couple of years,” the International Finance Corporation’s chief thought leadership officer Neil Gregory said at PEI Media’s Impact Investment Forum on Tuesday.
The IFC, the World Bank’s development finance sister institution with over $56.6 billion in assets under management, has raised over $20 billion from co-investors over the past five years, Gregory told an impact methodology-focused panel at the conference.
Five years ago, by contrast, “a lot of [our co-investors’] due diligence questionnaires were on our financial performance and the risks and returns of investing in the frontier emerging markets that we invest in,” said Gregory.
Natalie Adomait, a managing director at Brookfield, said, “There has been a shift from a qualitative to a much more quantitative reporting style.” Five years ago, investors would request examples of Brookfield’s ESG approach, and the firm provided these answers anecdotally.
“That’s changed,” Adomait explained. “Now investors want to see a lot more robust, quantitative reporting: statistics around diversity and inclusion; seeing the actual emissions reductions on an annual basis.”
“There’s a great amount of convergence now around reporting and using the same metrics,” added Gregory. The IFC released the Operating Principles for Impact Management, a framework of nine principles for measuring impact, in 2019. OPIM now has 129 signatories and the IFC recently surveyed these signatories.
“We found that about two-thirds of them use one of two impact indicator sets – either the IRIS+ dataset, which is managed by the GIIN, or the HIPSO indicator, which is managed by the IFC with other DFIs. These two data sets are over 90 percent aligned, so there’s actually a lot of commonality.”
Brookfield, a $600 billion AUM asset management giant, is currently fundraising for its first impact vehicle, the Global Transition Fund, with a $7.5 billion target. Adomait said Brookfield had designed a unique impact measurement and management system for this, which incorporates elements and principles of the Impact Management Project, an investors’ forum for building consensus around impact practice, performance and benchmarking, as well as elements of OPIM, SASB and the TCFD.
Philipp Essl, social impact director at Big Society Capital, was also on the panel. He said BSC, a fund of funds focused on social impact, also used the IMP and had found OPIM “very useful for getting our house in order internally”.
Essl said BSC used the IMP and OPIM to improve its own practice, compare itself to other investors and “assess and lay down improved impact management of our own fund managers”.
“In our early days, we had our own framework, but we often ended up spending most of the time discussing terminology and language,” Essl added.