The Global Impact Investment Network (GIIN), a membership body for impact investors, has announced plans to focus on engaging with institutional investors and explore a closer relationship with the Principles for Responsible Investment (PRI), as the impact investment market burgeons.
Amit Bouri, CEO of GIIN, who opened the Association of the Luxembourg Fund Industry Impact Invest Conference this month, said a number of shifts were driving interest in the impact investment market; including focus on increasing inequality, feeling the effects of climate change “in a visceral way” and people examining the role of capital, money and finance in relation to social and environmental progress.
GIIN, which was set up seven years ago, is well known for IRIS, its catalogue of metrics for social, financial and environmental performance that aims to drive organisations to use the same language for talking about impact. GIIN also hosts ImpactBase, an online directory of impact investment funds and their progress; does outreach; and aims to educate the impact investment market through reports and research.
Its latest report finds impact investors plan to increase commitment to the space by 16% this year. A survey of 150 committed impact investors, including pension funds and insurance companies found they committed a total of $15.2bn to impact investment in 2015 and planned a collective increase to $17.7bn in 2016.
Going forward, Bouri told conference delegates that the GIIN was looking at expanding its role. This included looking at how organisations can do impact investing more effectively; including deal structuring, legal issues and impact measurement.
GIIN will also look at its role as a convenor, bringing people together to identify gaps in the market and build products and models, such as holding companies and layered capital.
“We are looking at blended finance structures,” he said. “The impact investor market is quite diverse; there are donors, development agencies, market rate institutions. How can we use that diversity to our advantage, and how can different types of investors come into the same deal, for example by using guarantees? We have a working group on guarantees. Some GIIN members want to provide guarantees.”Bouri, who is co-founder of GIIN, took over as CEO from Luther Ragin in January 2015. Bouri started his work in impact investing when he was a strategy consultant with the Monitor Institute.
He also spoke about educating the next wave of impact investors, with a focus on institutional investors. “We are seeing more enter the market and aiming to scale up activity. We can play a role for the next wave of institutional investors.”
Speaking to Responsible Investor after his speech, Bouri said as the impact investment market continued to scale, it would need to access much larger pools of capital.
“Currently, the market is dominated by organisations that have been more pioneering in their approach, eventually it will need more investors to provide capital at scale and help innovative business models grow in terms of the size of their activities, but also in terms of their impact.”
He said a number of institutional investors were already actively involved in the GIIN network, like Prudential, Zurich, AXA and Australia’s Christian Super; and he wanted this to expand.
Bouri said the success and track record of these would drive more institutional investors to the market along with growing demand for sustainable financial products.
“Much of this will happen organically but there is a role for us to help accelerate the development of that segment of the market. We can leverage the learning of our community to inform institutional investors on the side-lines looking in and really wanting to get in the game.”
Likely connected to this is the GIIN seeking a closer relationship with the PRI. Bouri says the relationship so far has been positive and he would be open to working more closely together. “We met with [PRI Managing Director] Fiona Reynolds and she’s expressed openness.” The GIIN and PRI have already worked together on sessions on impact measurement.”
Impact measurement is often called the ‘holy grail’ of impact investment – how to do it effectively, and what to measure is still under great debate.
Bouri says GIIN will need to start to develop the “how” piece of impact measurement, having built shared definitions and language around impact through its IRIS tool.
“Common definitions allows us the basis for a comparative and relative discussion around performance and allows us to manage towards creating performance return.
“We’ve really focused on definitions and then on creating room for the market to determine which metrics over time will be the most useful for understanding different elements of performance.”
Bouri says the next step will be understanding how to integrate impact measurement into the entire investment process.
“It’s about how do you build that into the due diligence process? How do you build that into the investment committee process?“What do you pose as early indicators and signal that the company will perform well, just like you would for financial performance? How do you exit in a way that supports the sustainability of future impact of that company? How do you think about impact integrated across the lifecycle of the investment?”
As a starting point, GIIN has a report coming out later this year on the business value of impact measuring. It will interview 30 organisations, primarily investors, and some companies to understand where impact measurement is creating value for them.