Introduction to impact investing
Introduction
How to use these resources
Resources in this module
- What is impact investing
- Impact investment in context of the wider investment landscape
- The spectrum of capital
- The defining characteristics of impact investing
- History of impact investing
- Key global frameworks and standards – UN SDGs, the Impact Management Project and the IFC standards
- Challenges (definition, impact ‘washing’, measurement, myths) and opportunities (demand, data, policy support) and the evolving nature of the market
- Terminology
Glossary of terms
We have put together a glossary of terms for impact investing
Filter resources by level:
What is impact investing
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Impact investing definition
Global Impact Investing Network
Reading time: 3 minutes
The GIIN sets out the commonly agreed definition of impact investing together with the core elements. It also explains why people make impact investments and the types of investors who are doing this, with some examples and broader market information. It acts as a starting point to signpost people to other GIIN resources.
What the reviewer found helpful:“This was a one stop shop to get a quick overview of what Impact Investing is all about”
Mhairi Littlewood
Introductory
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What is impact investing
Rockefeller Philantropy Advisors
Reading time: 10 minutes
The Rockefeller Advisors’ Philanthropy Roadmap gives a brief introduction to impact investing for asset managers to start implementing this strategy. This resource includes a few key definitions for the sector, an explanation of the spectrum of capital, and an explanation of why impact investing matters. It also discusses the projections for the sector, highlighting the benefits and potential challenges of adopting this impact-first investment approach.
What the reviewer found helpful:“Great resource to understand the basics of impact investing. It is concise and jargon-free.”
Serena Grover
Introductory
✔ Recommended
Impact investment in context of the wider investment landscape
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Responsible, sustainable and impact investment
Pensions for Purpose
Reading time: 10 minutes
The slides are a useful summary of the current pension market and where impact investing sits in relation to traditional investing and philanthropy. It provides evidence to support values-based investments and gives examples of the types of equities, bonds and funds that could be included in an impact portfolio.
What the reviewer found helpful:“The slides contain some useful case studies that emphasise the positive impact a pension fund can have without sacrificing returns”
Eilidh Anderson
Introductory
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Impact Investing in Practice
Triodos Bank
Reading time: 7 minutes
Explains how companies arrive at scores for Environmental, Social and Governance (ESG). Explains key elements of sustainable investment strategies and discusses how ESG ratings can be used to shape these across: ESG investing, ethical or negative exclusions and positive inclusionary / impact investing Uses real examples to explain each investment strategy.
What the reviewer found helpful:“Easy to understand and readable summary of ESG scores and how these can be applied in different investing strategies.”
Mhairi Littlewood
Introductory
The spectrum of capital
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Spectrum of Capital
Bridges Fund Management
Reading time: 3 minutes
Bridges Fund Management sets out how the capital market can be defined. This helps to distinguish between environmental, social and governance (ESG) investing, socially responsible investing (SRI), and impact investing. To illustrate the various types of capital, this resource also includes a short description of Bridges Fund Management’s multi-fund approach.
What the reviewer found helpful:“The visual representation of the spectrum of capital is very clear”
Serena Grover
Introductory
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What is impact investment
British Venture Capital Association
Reading time: 5 minutes
BVCA’s website has a useful section outlining what impact investing is and where it overlaps with traditional investing and philanthropy. Its summarises charts from other impact organisations and introduces the reader to the UN Sustainable development goals. Page 2 is also a useful summary for beginners about measuring and managing impact.
What the reviewer found helpful:“This resource has a useful infographic describing the ‘Spectrum of Capital’ and the five steps towards an inclusive and sustainable economy”
Eilidh Anderson
Introductory
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Guide to Classifying the Impact of an Investment
Impact Management Project
Reading time: 15 minutes
The Impact Management Project explains how to classify the impact of an investment using 1) impact and 2) input from investors. Explains how to evaluate impact (using what, who, how much, the enterprise contribution and the risk), resulting in impact being classified as ‘Act to Avoid Harm’, ‘Benefit Stakeholders’ or ‘Contribute to Solutions’. Explains how to evaluate the level of activity the investor will have to provide a rating/scoring for the input from investors. Frameworks and templates are included with scoring methods to work this out.
What the reviewer found helpful:“A useful and technical resource to help think about and evaluate the impact of an investment with helpful framework templates and scoring systems included”.
Mhairi Littlewood
Introductory
The defining characteristics of impact investing
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Characteristics of impact investing
Global Impact Investing Network
Reading time: 1 minute
GIIN sets out four features of impact investing, helping to distinguish it against other forms of investing. These four characteristics are (1) Intentionality, (2) Evidence and Impact data in Investment Design, (3) Manage Impact Performance, and (4) Contribute to the growth of the industry.
What the reviewer found helpful:“The visual representation of impact investing asset classes”
Serena Grover
Introductory
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Creating Impact:The Promise of Impact Investing
International Finance Corporation
Reading time: 5 minutes
The executive summary on page xi is a useful introduction to impact investing and highlights where it is different to value-aligned investment. Its highlights 3 observable attributes of impact investors: intent, contribution, and measurement. More experienced individuals can progress to chapters 1, 2 and 3 for an in-depth analysis of the impact market including helpful charts are particularly helpful at summarizing complex assets and returns
What the reviewer found helpful:“This is a useful definition of impact investing that focuses on the approach of the investor”
Eilidh Anderson
Introductory
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Impact isn’t ESG
M&G
Reading time: 12 minute video
In this interview, Investment Director, Veronique Chapplow discusses the different types of investment strategies within responsible investment. She tackles the jargon that often inhibits people from investing in this space. She also talks about impact investing and the four key principles that need to be involved to make something an impact investment.
What the reviewer found helpful:“A video interview that helpfully clears up common terms that are used in ESG, sustainability, ethical investing and impact.”
Mhairi Littlewood
Introductory
✔ Recommended
History of impact investing
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Impact Investing: a brief history
Bridges Ventures
Reading time: 20 minutes
Trelstad’s article explores the history of impact investing, and highlights some of the issues within the field. This article includes some of the key definitions that help to distinguish impact investing from other similar forms– something Trelstad believes financial professionals have a lack of clarity over.
What the reviewer found helpful:“A good preliminary resource to understand the basics of impact investing and some of the key factors preventing this strategy expanding more rapidly within the industry”
Serena Grover
Introductory
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Roadmap for the Future of Impact Investing
Global Impact Investing Network
Reading time: 30 minutes
This is a very interesting summary impact investing industry and it explains how it has evolved since 2007 from uncoordinated innovation to building a marketplace. It also summarises the progress across three different platforms: intermediation, infrastructure and absorptive capacity.
What the reviewer found helpful:“The timelines on pages 33-35 provide a nice overview of the evolution of impact investing over the past 15 years, including key reports, policy changes and measurement landmarks.”
Eilidh Anderson
Intermediate
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The History of Impact Investing with Antony Bugg-Levine – Social Capital Markets
Social Capital Markets
Reading time: 50 min listen
Antony Bugg-Levine of the Nonprofit Finance Fund speaks in this interview about the history and evolution of impact investing, as well as how this can be relevant in today.
What the reviewer found helpful:“A great listen about the history and evolution of impact investing as well as how it relates to modern issues and the pandemic.”
Mhairi Littlewood
Intermediate
✔ Recommended
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The Risk of Impact: Five steps towards and inclusive and sustainable economy, Oct 2017
Impact Investing Institute
Reading time: 25 minutes
The UK National Advisory Board for Impact Investing presents their five-step impact investing and purposeful business strategy to tackle some of the UK’s most significant societal issues, alongside boosting These five recommendations are listed below: 1. Adopt an inclusive and sustainable UK investment agenda 2. Empower savers to invest in line with their values 3. Put purpose at the heart of public procurement 4. Accelerate the rise of purposeful business 5. Strengthen the UK’s role in international development finance
What the reviewer found helpful:“This gives a clear overview of the impact ecosystem within the UK and strategies to scale-up”
Serena Grover
Intermediate
✔ Recommended
Key global frameworks and standards – UN SDGs, the Impact Management Project and the IFC standards
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Investing for impact: Operating principles for impact management
International Finance Corporation
Reading time: 15 minutes
The report summarises the key building blocks for a robust impact management system and act as a reference point against which funds and institutions may be assessed. The 9 operating principles covering each of the 5 steps in the investment process: strategy, origination and structuring, portfolio management, exit, and independent verification of signatories.
What the reviewer found helpful:“The operating principles for impact management include a helpful description of mitigating and managing ESG risks”
Eilidh Anderson
Intermediate
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UN Sustainable Development Goals (SDGs)
United Nations
Reading time: N/A
The United Nations outlines their 17 sustainable development goals to achieve peace and prosperity for people and the planet by 2030. The goals were established in 2015, superseding the Millennium Development Goals.
What the reviewer found helpful:“This interactive resource makes it easy to understand each of the 17 SDGs and gain access to publications, events and actions to help achieve them”
Serena Grover
Introductory
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Investing with SDG outcomes: A five-part framework
United Nations Principles for Responsible Investment
Reading time: 40 minutes
The framework helps investors understand the real-world outcomes of their investments and how to shape those outcomes to help meet the UN Sustainable Investing Goals (SDGs) The report explains how the UN SDGs go beyond ESG mitigation and provides examples of how that can used by investors.
What the reviewer found helpful:“There is a short and inspiring video that accompanies this report which summarises the current market and the 5 part framework”
Eilidh Anderson
Intermediate
Challenges (definition, impact ‘washing’, measurement, myths) and opportunities (demand, data, policy support) and the evolving nature of the market
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Creating impact: the Promise of impact investing,
International Finance Corporation
Reading time: 90 minutes
Chapter 2 presents a deep dive into some of the challenges facing the impact investing world, exploring financial returns, impact management and frameworks, and regulatory barriers. Chapter 3 explores the scalability of the concept of impact investing and the importance of collective action and collaboration for the future.
What the reviewer found helpful:“A very detailed paper covering impact measurement theories and frameworks and using helpful diagrams to aid explanation.”
Mhairi Littlewood
Advanced
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Annual Impact Investor Survey 2020
Global Impact Investing Network
Reading time: 30 minutes
The GIIN’s 2020 Annual Impact Investor Survey details the investment activity of 294 leading impact investors, collectively managing USD 404 billion, over 2019 and forecasted into 2020. The survey has shown that impact investing has growth in depth and sophistication over 2010, with a rise in realised gross returns and assets over time and impact measurement and management practices.
What the reviewer found helpful:“The interactive charts were particularly useful for representing the impact investor survey data”
Serena Grover
Intermediate
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Growing a culture of social impact investing in the UK – executive summary
UK Government
Reading time: 20 minutes
This report gives a background on the UK social impact ecosystem, the current challenges and some recommendations for the future growth. The recommendations clearly explain what government, regulators, professional bodies and the financial services industry can do to better the industry, outcomes and make it easier for people to invest. The report gives 5 key action areas including improving deal flow and improving reporting. The report sets these out in the context of a ‘virtuous cycle’ whereby rising demand from investors and advisor engagement together with a supportive regulatory environment leads to more quality products. This enables social purpose organisations to attract investment which increases the number and scale of investment opportunities. From this, advancement in impact measurement and reporting will spur further demand.
What the reviewer found helpful:“This is a really concise summary of how all organisations can contribute in a practical and achievable way”
Eilidh Anderson
Intermediate
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From the Margins to the Mainstream (challenges: pp. 23-27)
World Economic Forum
Reading time: 10 minutes
Discusses the fact there are challenges faced by institutional investors that keep them from allocating capital towards impact investments. Most of these can be attributed to one of the four broad overarching challenges:: early-stage ecosystem, small average deal size, fit within asset allocation framework and double bottom line. When considering each of these, we must also consider the geography and that different types of institutional investors face different challenges.
What the reviewer found helpful:“A thorough summary of the challenges faced by institutional investors in impact investing, summarised clearly into four categories”.
Mhairi Littlewood
Intermediate
Terminology
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Glossary of terms in the impact ecosystem
European Venture Philanthropy Association
Reading time: N/A
EVPA has created a glossary of key terms within the impact ecosystem. Key definitions are highlighted at the top of the site and all subsequent definitions are listed in alphabetical order.
What the reviewer found helpful:“This glossary really helps to create clarity in field suffering from an alphabet soup. Definitions are clear and concise.”
Serena Grover
Introductory
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Glossary
Impact Management Project
Reading time: N/A
A comprehensive impact management glossary containing hundreds of terms The website provides a forum for building global consensus on measuring, assessing and reporting impacts on people and the natural environment. It is relevant for enterprises and investors who want to manage environmental, social and governance (ESG) risks, as well as those who also want to contribute positively to global goals.
What the reviewer found helpful:“This is a very useful glossary that has definitions ranging from the most basic to advanced financial and impact investment terminology”
Eilidh Anderson
Introductory
✔ Recommended
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Understanding sustainable investing and ESG terms
Schroders
Reading time: 10 minutes
Includes comprehensive definitions of common terms in Sustainability, Governance & Active Ownership, Screened Investments, Thematic Investing, Impact Investing and Industry Organisations and Initiatives.
What the reviewer found helpful:“This is a helpful and comprehensive overview of acronyms and definitions that are useful in making sense of the ESG, sustainability and impact investing landscape.”
Mhairi Littlewood
Introductory
✔ Recommended