Beyond Good Intentions: Verifying Your Impact for Confident Investing

By Mohit Saini & Tom Alker, Phenix Capital Group 

Several industry standards exist to enhance impact management practices, including the Impact Principles, SDG Impact Standards, and the Gold Standard. Among these, the Impact Principles, also known as the Operating Principles for Impact Management, is one of the most recognised frameworks. Developed by the IFC (International Finance Corporation) in 2019, stewardship of these principles transitioned to the GIIN (Global Impact Investing Network) in 2022. 

The Nine Impact Principles 

These Impact Principles provide a framework for asset managers to design and implement impact management systems, integrating impact considerations throughout the investment lifecycle. They are scalable and applicable to all types of impact investors, regardless of portfolio size, asset class, sector, or geographical focus. The following graphic showcases these nine Impact Principles. 

A Deep Dive into the Signatories 

These Principles have been adopted by 181 Signatories across 40 countries, managing US$ 540 billion in AUM (as of July 2024). To become a Signatory, organisations pay a one-time registration fee and annual filing fees that scale with their AUM. Signatories are required to publish Annual Disclosure Statements on their website and provide the links to the Impact Principles website. 

Within the last three years, 22% new Signatories aligned with the Principles. 92% of the Signatories publish disclosure statements, while 76% disclose verifier statements. Our analysis of Signatories with disclosure statements shows that 50% manage funds with AUM up to US$ 500 million. Additionally, nearly half (48%) of the Signatories are domiciled in five countries, including the U.S., U.K., and Switzerland. 

Understanding The Verification Process 

Phenix assesses the alignment of Signatories' impact measurement and management (IMM) systems, practices, policies, processes, and tools with the Principles using a proprietary rubric. This rubric is developed based on the guidance provided by the Principles. The verification process involves a thorough document review, discussions with the asset manager, and rigorous internal deliberations.  

The five-phase process for Impact Principles verification is summarised in the exhibit below.

Phenix’s Value Proposition 

Our verification process adds value to Signatories in a variety of ways.  

• We provide an independent ‘limited assurance’ verifier statement which includes ratings and a summary of findings.  
• We provide detailed insights into Signatories’ alignment with each of the nine Impact Principles.  
• We offer recommendations based on industry best practices. Phenix has been exclusively focused on impact investing for well over a decade.  

Why Verify? 

The convergence of leading standards, policies, and regulations suggests that the significance of and demand for impact verification will only grow over time. There are three key reasons to consider it: 

1. Enhanced accountability and credibility: By sharing verification results, Signatories can strengthen trust with investors and demonstrate alignment with industry standards. Their transparency also attracts investors who prioritise measurable social and environmental returns alongside financial goals. This also helps mitigate potential reputational risks and addresses growing scepticism about impact-washing.  
2. Curated best-practices advice to improve impact processes: Verification serves as a learning exercise for Signatories. Actionable recommendations and peer group examples, curated from the collective knowledge of emerging practices across asset classes, help Signatories to continuously improve their practices and differentiate themselves from competitors, potentially attracting more impact-oriented capital. 
3. Showcase leadership in impact investing: Independently verified Signatories can demonstrate their commitment to creating positive social and environmental impact. They can also share best practices and knowledge with peers, raising the bar across the entire impact investing field. 

While good intentions are essential, verifying your impact claims helps in demonstrating proof. The Impact Principles provide a robust framework for investors of all sizes to integrate impact considerations throughout their investment journey.  

By taking the extra step to verify your impact, you not only demonstrate your transparency and commitment to impact investing but also position yourself as a leader in this growing market. 

Learn more about our Impact Principles verification services here. 

Mohit Saini works with the Impact Advisory team at Phenix Capital Group. He advises global institutional investors and fund managers on developing 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.

Tom Alker works in Marketing and Investor Relations at Phenix Capital Group. He creates both short- and long-form content, effectively communicating Phenix's products and services to an impact investing audience. Tom also promotes global conferences to the institutional investor network, helping to build the audience for Phenix's events.

The data presented in Exhibit 2 was analysed by Rami Majed, Sales & Business Development Analyst at Phenix Capital Group.