ANNOUNCEMENT – “BlueMark Introduces Leaderboard of Impact Investors With the Strongest Impact Management Practices”

ANNOUNCEMENT – “BlueMark Introduces Leaderboard of Impact Investors With the Strongest Impact Management Practices”

Leaderboard and expanded data set on best practices in impact management released as part of BlueMark’s third annual ‘Making the Mark’ report

BlueMark, an impact verification specialist, today published its third annual report on best practices and trends in impact management featuring data and insights gleaned from the firm’s verifications of investor impact management practices. BlueMark’s methodology is grounded in the Operating Principles for Impact Management (“Impact Principles”), a leading market standard for impact management practices. The full report — “Making the Mark: Spotlighting Leadership in Impact Management” — is available at www.bluemarktideline.com/making-the-mark-2022.

The analysis is based on 60 verifications for impact investors managing a combined $160 billion in impact assets under management. This is double the sample size of last year’s edition of “Making the Mark,” which was based on 30 verifications for investors managing a combined $99 billion in impact AUM. The larger sample size reflects the growing demand for impact verification and brings additional clarity into trends and challenges across the market.

“We continue to see healthy competition among impact investors seeking to demonstrate best practices in impact management and learn valuable lessons from their peers,” said Christina Leijonhufvud, CEO of BlueMark. “BlueMark’s verification approach and dissemination of aggregated findings and benchmarks are designed to facilitate a race to the top by encouraging impact investors to adopt industry best practices and address shared challenges.”

New features in this year’s ‘Making the Mark’ report include:

  • Introduction of the BlueMark Practice Leaderboard, which highlights the five BlueMark clients that scored in the top quartile against eight of the nine core features of robust impact management as reflected in the Impact Principles (the ninth Principle–independent verification–is not scored). The inaugural edition of the Leaderboard features Bain Capital Double Impact, Finance in Motion, LeapFrog Investments, Nuveen Private Equity Global Impact, and Trill Impact.
  • An updated BlueMark Practice Benchmark, which shows the distribution of investor impact management practices by quartile, and an expanded Dashboard of Practice Indicators, which provides a tool for investors to assess their own practices against a peer set. This year’s Dashboard features additional data points on leading practices, such as the use of the IMP’s ABC framework (Avoid, Benefit, Contribute) to determine impact objectives (8% of verified investors) and the use of a composite scoring methodology to evaluate portfolio performance (28% of verified investors).
  • Overview of the current state of the impact verification market based on analysis of the 100 signatories to the Impact Principles that have completed an independent verification as of May 2022. BlueMark was responsible for 41% of all third-party verifications (excluding internal verifications) for signatories to the Impact Principles, more than four times as many as the next closest verification provider.
  • Case studies highlighting unique or innovative impact management practices, featuring Trill Impact (aligning staff incentives to impact achievement, a component of Principle 2), MedAccess (assessing investor contribution, a component of Principle 3), Lightrock (assessing impact risks and negative impacts, a feature of Principle 4), Finance in Motion (incorporating the voice of stakeholders, related to Principle 6), and British International Investment (assessing the sustainability of impact at exit, Principle 7).

BlueMark’s analysis also revealed several interesting trends across the impact investing industry.

  • Despite growing discussion about impact-linked compensation structures, the practice remains limited. Only 38% of impact management systems explicitly integrate impact considerations into staff incentives, with performance development and review processes identified as the most common method (25% of verified investors). Meanwhile, more direct financial accountability mechanisms — such as annual bonuses or impact-linked carry — are less common at 17% and 3% adoption, respectively.
  • Impact investors are aligning around a handful of measurement frameworks. A majority of impact investors (77%) have adopted industry frameworks and/or taxonomies for selecting their impact metrics, with IRIS+ emerging as the most common framework followed by HIPSO and an array of ESG reporting standards. Similarly, when it comes to ESG management, 78% of verified investors have adopted an industry standard or framework to inform their approach, led by the IFC Performance Standards (43%) and SASB (25%).
  • Investors vary significantly in their establishment of ex-ante impact targets, compromising the market’s ability to gauge success. While 63% of impact investors monitor impact performance against an expectation — such as a baseline KPI or qualitative impact rating — the quality of target-setting practices varies widely. For instance, only 22% of verified investors have a clear protocol for engaging investees in the event of impact performance, partly due to the lack of clarity on what over- or under-achievement looks like from an impact perspective.
  • An increasing number of impact investors are engaging with key stakeholders and actively solicit their input. Less than a third of impact investors (28%) engage with key affected stakeholders and actively solicit their input, an increase of 17 percentage points compared to last year’s research sample. While still a minority practice, the commitment to solicit input from target stakeholders experiencing the impact outcomes is a key part of impact management and monitoring.

“These findings corroborate what we’ve observed across the impact investing industry and in previously published research,” said Leijonhufvud. “While there are several encouraging signs of improvement in impact management practices, many impact investors still have a long way to go if they want to be seen as market leaders.”

BlueMark’s current verification services are structured around the two key pillars of accountability for impact: Impact Management Practice (the extent to which an investor or company has the systems, processes, and capabilities to contribute to achieving the intended impact); and Impact Performance (the extent to which an investor or company has achieved the intended impact results). To date, BlueMark has completed 75 verifications for organizations managing a combined $164+ billion in impact assets.

 

About BlueMark

BlueMark is a leading provider of impact verification services for investors and companies. Founded in 2020, BlueMark’s mission is to “strengthen trust in impact investing.” BlueMark’s verification methodologies draw on a range of industry standards, frameworks and regulations, including the Impact Management Project (IMP), the Operating Principles for Impact Management (OPIM), the Principles for Responsible Investment (PRI), SDG Impact, and the Sustainable Finance Disclosure Regulation (SFDR). Learn more about BlueMark and impact verification at www.bluemarktideline.com.

BlueMark Publishes Research Calling for Market Alignment on the Key Elements of Quality Impact Performance Reporting

BlueMark Publishes Research Calling for Market Alignment on the Key Elements of Quality Impact Performance Reporting

“Raising the Bar” report is first in a series aimed at improving the quality and usefulness of impact performance reports produced by impact investors

 

Apr. 19, 2022 – BlueMark, a specialist provider of impact verification services for investors and companies, today published a report calling for a stronger approach to impact performance reporting that would make it easier for the market to analyze and compare impact performance. The full report, “Raising the Bar: Aligning on the Key Elements of Impact Performance Reporting,” is available at https://bluemarktideline.com/raising-the-bar

The research was conducted with the support of grant funding from The Rockefeller Foundation and the Tipping Point Fund on Impact Investing.

“While impact reporting by private markets impact investors is a common practice, the lack of widely-accepted guidelines for reporting on impact performance has resulted in heterogeneous approaches and a perception by end readers that the reports are incomplete and insufficient to meaningfully interpret impact results,” said Christina Leijonhufvud, CEO of BlueMark. “Given the market imperative to improve the quality and usefulness of impact performance reports, we wanted to gain a deeper understanding of best practices in impact reporting and propose pathways to accelerate their adoption.”

A two-pronged approach was taken to the research project. First, BlueMark analyzed a sample of 31 recent impact reports by private market general partners (GPs) to identify trends and common practices. Second, BlueMark consulted with 57 diverse industry stakeholders–via both one-on-one interviews and focus groups–to gain insights into the challenges and opportunities related to producing and consuming impact reports.

These research activities surfaced several gaps and challenges that limit the utility of impact performance reports, including: lack of specificity about goals or targets, cherry-picking of data, missing stakeholder perspectives, and emphasis on successes as opposed to risks or underperformance.

However, the research also revealed a high degree of alignment around what constitutes a quality and decision-useful impact performance report. Building on these areas of consensus, BlueMark–in close consultation with industry stakeholders–composed the following proposed “Key Elements” of quality impact performance reports.

 

Overarching Elements:

  • Completeness: A quality report provides information about all portfolio holdings and addresses impact performance at the fund and holding level.
  • Clarity: A quality report presents impact information in a manner that is accessible and that facilitates interpretation, with clear definitions, assumptions and supporting calculations.

Specific Elements:

  • Well-defined objectives and expectations: A quality impact report is explicit about the fund’s intent and impact objectives, including clarity on investor contribution and expected results.
  • Relevant metrics: A quality impact report includes quantitative metrics that are drawn from industry standards wherever possible and that link to the articulated impact objectives.
  • Relative performance results: A quality impact report provides information that allows the reader to effectively interpret and contextualize measures of progress and performance against targets or expectations and against external benchmarks, as available. 
  • Integrated stakeholder perspectives: A quality impact report identifies affected stakeholders and incorporates their experiences and voices to the extent possible. 
  • Transparency about risks and lessons learned: A quality impact report is forthcoming about potential impact risks, failures, and lessons learned.

 

These elements were tested in focus groups of both GPs and LPs, including members of the BlueMark Allocator Working Group, a learning community of some of the leading institutional allocators with a shared commitment to impact investing.

To help increase adoption of these elements, BlueMark is collaborating with Impact Frontiers, an initiative of the Impact Management Project (IMP), to pilot an approach to verifying impact reports with a select group of firms from the Impact Frontiers community. The verification methodology will build on the research findings in the first “Raising the Bar” report. Key learnings from this pilot will be published in a second report in late 2022.

“The desire to advance beyond impact practice to impact performance is a common refrain among the investors participating in Impact Frontiers cohorts,” said Mike McCreless, Executive Director of Impact Frontiers. “The report launched today represents a great step in that direction and we look forward to collaborating with BlueMark and the Impact Frontiers community of investors to continue the momentum.” 

BlueMark’s current verification services are structured around the two key pillars of accountability for impact: Impact Management Practice (the extent to which an investor or company has the systems, processes, and capabilities to contribute to achieving the intended impact); and Impact Performance (the extent to which an investor or company has achieved the intended impact results). To date, BlueMark has completed over 65 verifications for organizations managing a combined $156+ billion in impact assets.

About BlueMark

BlueMark is a leading provider of impact verification services for investors and companies. Founded in 2020, BlueMark’s mission is to “strengthen trust in impact investing.” BlueMark’s verification methodologies draw on a range of industry standards, frameworks and regulations, including the Impact Management Project (IMP), the Operating Principles for Impact Management (OPIM), the Principles for Responsible Investment (PRI), SDG Impact, and the Sustainable Finance Disclosure Regulation (SFDR). Learn more about BlueMark and impact verification at www.bluemarktideline.com