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BlueMark creates impact benchmark

by Krystal Scanlon 10 May 2021

BlueMark has created a benchmark for tracking best practices in impact management in a bid to eliminate impact-washing.

The benchmark, which claims to be the first-of-its-kind, allows asset allocators to differentiate between impact leaders and learners by identifying how well managers align with the Operating Principles for Impact Management.

It is based based on aggregated data and insights from 30 impact verifications, which cover the following:

  • Impact objectives
  • Portfolio-level impact management
  • Investor contribution
  • Impact due diligence
  • ESG risk management
  • Impact monitoring
  • Impact at exit
  • Impact review

Each BlueMark impact verification involves conducting multiple interviews with client teams as well as reviewing investment policies, transaction documents, data and reports. The overall benchmark includes three categories to define practices of leading, median and learning impact investors, with the view of providing a clear understanding of what it means to rigorously manage for impact.

Practice leaders

  • Top quartile (75% or more)
  • These firms implement all core elements of impact management, as well as several leading-edge practices that may go above and beyond best practices
  • Committed to further learning and improvement that helps to continually advance the bar for best practice

Practice median

  • Median impact investor (25%-50%)
  • These firms implement many of the core elements of impact management, but have significant room for development

Practice learners

  • Bottom quartile (25% or less)
  • These firms have well-articulated impact intentions, but lack some of the core impact management practices needed to generate positive impact
  • Many are in the early stages of their impact investment journeys, while others have yet to embed impact considerations at key stages of the investment process

According to BlueMark’s CEO Christina Leijonhufvud, a benchmark is essential to the continued institutionalisation and maturation of the impact investing market. “By establishing a shared consensus on best practices in impact management, we have created a valuable tool we hope market participants can use to improve their own practices and to see where they stand against their peers.”

Practice makes perfect

BlueMark conducted research on a sample of impact 24 managers, with a combined total of $99bn in impact AUM, to take part. These included Bain Capital Double Impact, KKR, LeapFrog Investments and Partners Group.

Findings from this survey, which were subsequently published in BlueMark’s Making the Mark: The Benchmark for Impact Investing Practice, found 93% of impact investors in the sample align their investments with the sustainable development goals (SDGs), while 48% specifically align with the 169 targets underlying the SDGs.

Most (90%) of those surveyed identify select ESG risks in their investment decisions, but only 43% systematically engage investees to address ESG gaps and unexpected risks.

Just over half (57%) of managers compared actual performance with expected impact performance, while only 11% requested input from key stakeholders to understand their impact performance.

Less than half (43%) of investors directly aligned staff incentive systems with impact performance. Of that percentage, 17% tied annual bonuses to impact, while 3% tied carry to impact.

Additionally 32% of those sampled monitored and reviewed unexpected positive and negative impacts, while 30% used learnings from impact performance reviews to improve investment decisions and portfolio management.

Following this sample, BlueMark will continue to update the Practice Benchmark as it completes additional verifications. It is also developing a similar benchmark for measuring and tracking impact performance.

To view BlueMark’s full report, which was developed with support from The Rockefeller Foundation, click here.

BlueMark is an independent subsidiary of Tideline, an impact investing consultancy. It provides impact verification with a mission to strengthen trust in impact investing and increase accountability for impact.

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