IFC Guidelines Seek to Steer Trillions Held by Institutional Investors into Impact Investing

IFC, a member of the World Bank Group, is working to make it easier for institutional investors who hold nearly $100 trillion in assets under management worldwide to enter the fast-growing impact investing market and contribute to achieving the Sustainable Development Goals by 2030. At the Annual Meetings of the World Bank Group and the International Monetary Fund, IFC introduced draft principles that are designed to become a market standard for impact investing—in which investors seek to generate positive impact for society alongside strong financial returns. IFC, the world’s oldest and largest impact investor, led the development of the principles, in partnership with leading asset managers, asset owners, asset allocators, development banks, and financial institutions. 

The market for impact investing—currently $228 billion—has grown fivefold since 2013 as investors align their investment strategies with the Sustainable Development Goals and the Paris Climate Agreement. But consensus has not been established on what constitutes an impact investment. As a result, many investments billed as impact investments fall short of their hype, hurting public confidence in the market.

“Now is the time—while the market is still young— to develop common principles of how to manage investments for impact,” said IFC CEO Philippe Le Houérou. “Our ambition is to grow the market for impact investing exponentially by bringing in institutional investors who hold close to $100 trillion in assets under management.”

The draft principles draw on IFC’s 62 years of experience in investing in emerging markets to achieve strong development impact and financial returns. They reflect best practices across a range of public and private institutions. They integrate impact-investing considerations into all phases of the investment lifecycle: strategy, origination and structuring, portfolio management, exit, and independent verification. This will help avoid “impact washing”—the use of misleading claims—and bolster confidence in the market.

IFC led the development of the principles in partnership with asset managers, asset owners, asset allocators, and development banks and financial institutions. Through the end of 2018, IFC is inviting additional reviews of the draft principles from investors, companies, academics, civil society and governments. The principles will be available for investors to sign on to after that. The final principles and the first set of signatories are expected to be announced at the Spring Meetings of the World Bank Group and the IMF in April 2019 in Washington, D.C.

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