13 May 2021 / Research
New benchmark to ‘root out impact-washing’ finds room for improvement
By Natasha Turner
BlueMark study launches new impact benchmark and finds follow up with investees on impact performance to be lacking
Impact investors have work to do when it comes to tracking and following up on impact after investments are made, according to a study carried out by impact verification company BlueMark.
The firm’s second Marking the Mark study (Marking the Mark: The Benchmark for Impact Investing Practice) found of the 30 investors it verifies with a combined $99bn in impact assets under management, 97% consider impact performance in the due diligence process and 90% when making an investment but remarked “the majority still have room to improve on assessing their contribution to investees’ impact and on following up with investees on impact underperformance, among other areas”.
The report added: “Verified investors struggle most to ensure impact endures at and beyond exit and to consistently adapt their processes based on lessons learned.”
It also found alignment of incentives with impact to still be in the early stages, with 43% directly aligning staff incentives with impact performance, and said more effort is needed to systematically avoid harm after identifying ESG risks. It also noted impact performance needs to be more inclusive of stakeholders with just 11% asking for input from their stakeholders.
However, other findings were more positive. 93% of the impact investors verified align their investments with the Sustainable Development Goals, and new and smaller firms can be leaders in impact management.
“For impact investing to have the power it can, the world and investors need to be able to see and measure impact—transparency is central to its integrity,” said Dr. Rajiv J. Shah, President of The Rockefeller Foundation, one of the founding investors in BlueMark. “Impact verification will help us hold investors accountable for both their claims and their practices.”
The BlueMark report also marks the launch of the company’s new impact benchmark, designed to “root out impact-washing”.
The Practice Benchmark assesses how investors align with the market standard for impact management practices, the operating principles for impact management (Impact Principles). The impact investing organisations that have had their impact management systems verified by BlueMark include Big Society Capital, Calvert Impact Capital, CDC Group, Franklin Templeton Social Infrastructure Fund and Nuveen.
It categorises investors either as practice leaders, practice median or practice learners. The chart below shows the results on a four-part scale: low, moderate, high, advanced.
“The idea of a benchmark is essential to the continued institutionalisation and maturation of the impact investing market,” said Christina Leijonhufvud, CEO of BlueMark and lead author of the report.
“By establishing a shared consensus on best practices in impact management, we have created a valuable tool that we hope market participants can use to improve their own practices and to see where they stand against their peers.”