Setting the Standard for Impact Performance Reporting

By Mohit Saini

In the rapidly expanding impact investing market, enhancing investor trust, and mitigating the risks of ESG/SDG/SFDR/Green/Impact-washing require two crucial elements. Firstly, implementing robust ESG and impact management practices and systems. Secondly, ensuring comprehensive and accurate reporting of impact performance.

Thanks in large part to the Operating Principles for Impact Management (The Impact Principles) and the credible work carried out by Impact Frontiers, the impact investing community (spanning various sectors, regions, and asset classes) has achieved a greater consensus and understanding for designing and implementing their ESG and impact management systems.

However, there remains a substantial need for concerted efforts to establish market-wide consensus on credible impact performance reporting. Impact Frontiers' 'Draft Impact Performance Reporting Norms' is an excellent initiative towards achieving this consensus-building goal. Going beyond conventional market practices, it has the potential to revolutionise impact performance reporting. Balancing standardisation and flexibility, the Norms provide a valuable resource for impact investors to conceptualise the content (largely evergreen), structure, and presentation of their impact reports.

We commend the release of the draft Norms and fully endorse Impact Frontiers’ objectives in helping investors to mitigate the risks associated with impact-washing and cherry-picking. In December 2023, we submitted a comment letter to enhance these Norms and support the initiative. Our comment letter is informed by more than a decade of experience of working with investors across diverse asset classes, impact themes, and geographies.

In summary, we recommend that the Norms should:

• Emphasise prioritisation of qualitative narrative until reliable quantitative metrics can be reported by select emerging fund managers, ensuring transparency via the "disclose-or-explain" method.
• Encourage report preparers to adhere to the prescribed reporting and structuring guidelines for publicly available impact performance reports as well to encourage credibility, consistency, and informed decision-making.
• Advocate for report preparers to adhere to the principle of conservatism, ensuring transparent disclosure of impact risks, key assumptions, research evidence, and data sources.
• Offer guidance to report users on supporting report preparers and sharing insights within the investor community.

You can read our comment letter here.

At Phenix Capital Group, we firmly believe that these norms will play a pivotal role in establishing a unified foundation that promotes integrity, comparability, and quality in global impact performance reporting. Consequently, we have proactively begun incorporating the draft Norms into our client offerings, to enhance the content, structure, and format of our impact performance reports.  

We can help you with Impact Advisory, Fund Assessment & Selection, Reporting, Due Diligence, and Principles verification. Find further information here.

Mohit Saini is part of the Impact Advisory team at Phenix Capital Group. He advises global institutional investors and fund managers on developing and enhancing their impact management (IM) and reporting strategies and solutions. He conducts impact due diligence on fund managers and verifies the alignment of their IM practices with the Impact Principles.