16 October 2018

IFC Impact Investing Principles

The IFC recently released the Operating Principles for Impact Management (the Principles), a set of impact investing standards developed by asset owners, managers, and other industry experts. These Principles mark an important first step toward institutionalizing a uniform set of standards that impact investors of all sizes can reference when making investment decisions. They provide investors with guidance on how to manage investments so that they contribute to measurable positive social, economic, or environmental impact, while simultaneously generating financial returns. Investors may apply the Principles to their entire portfolio, or in the case of institutions that also engage in non-impact transactions, a smaller subset therein.

While all nine Principles provide valuable guidance, Principle 5 is key to safeguarding against adverse environmental and social impacts. It counsels investors to “assess, address, monitor, and manage the potential negative effects of each investment.” The text explains that this may require asset managers to engage with their investees in order to ensure they are addressing gaps in their current Environmental, Social, & Governance (ESG) monitoring systems. It also instructs managers to monitor the social and environmental risk posed by their investees, provide them with support as needed, and “address unexpected events.” Such guidance not only underscores the need to account for potential harm when making impact investment decisions, but highlights the importance of providing avenues for remedy when unanticipated harm results. Principle 8 then pushes investors to review and document the positive and negative impact of their investments, with an eye toward improving their holistic impact performance in future investments.

As an organization committed to advancing accountability and access to remedy for communities harmed by all internationally financed projects, Accountability Counsel welcomes the publication of the IFC’s Principles for Impact Management. The accountability and holistic impact themes that underpin Principles 5 and 8 likewise inform our own Impact Investing Initiative, a project that seeks to channel community feedback into impact investment decisions.