Impact Frontiers is working hard to fill some of the considerable space left by the conclusion of the Impact Management Project’s foundational work. IMP convened industry leaders and made huge progress in catalyzing agreement on a range of impact norms.
The next stage for Impact Frontiers is to partner with the Predistribution Initiative (PDI) to launch public consultation of “Investor Contribution 2.0” which aims to improve the management and disclosure of investor contribution to impact and systemic risks.
The consultation period is open until April 30, 2023 and interested practitioners can participate via interactive Zoom “huddles,” an online discussion forum, and direct engagement with the facilitators.
Impact Frontiers is seeking feedback on the proposed definitions and strategies for investor contribution described in the Investor Contribution Definitions & Strategies white paper, and on two related templates created to support investors:
- Investor Contribution Definitions & Strategies
- Proposed Direct Investment & Engagement Impact Templates for Private Market Investors
- Proposed Investment Structures & Governance Disclosure Templates for PE, PD, VC
The result will be published as a public resource in mid-2023.
The need for greater clarity and consensus on investor contribution arose out of a growing recognition that the way investors structure their funds, govern their funds, and make investment decisions can have wide-ranging positive and negative impacts on people and the environment.
To better manage these impacts, it is first necessary to have a shared understanding of and resources for evaluating investor contribution, much like we have metrics and frameworks for evaluating portfolio companies’ contributions to impacts and risks.
In consultation with investors, Impact Frontiers and PDI have identified at least four channels through which investors seek to influence outcomes:
- Capital allocation (such as investment and/or divestment)
- Non-financial engagement (like providing guidance or technical assistance to portfolio companies)
- Choice of investment structures (degree of leverage, potential for tax avoidance, compensation ratios, fund and holding periods)
- Internal firm management (such as incentive structures, accountability mechanisms, responsible political conduct, approaches to DEI)
The consultation aims to develop consensus among private market actors, GPs and LPs, about how best to measure and manage investor contribution.