ImpactAlpha – “Why the impact investing industry is ready for a practice benchmark”

ImpactAlpha – “Why the impact investing industry is ready for a practice benchmark”

This piece was originally published in ImpactAlpha.

Benchmarks play a crucial role in financial markets and asset management specifically, allowing investors to see how they stack up against their peers and making the allocation of capital more seamless and efficient. By far the most commonly used benchmark today is the S&P 500 (usually taking the form of the SPY ETF managed by State Street), which tracks the performance of the 500 largest U.S. companies.

There are similar benchmarks for virtually every asset class and type of strategy — Russell 3000 for a larger pool of U.S. stocks, MSCI ACWI for global equities, or U.S. Treasuries for bonds with varying maturities. Performance against these benchmarks is often used as a short-hand way to determine if an investor is outperforming–or underperforming–the market over a certain time period. Eventually, more capital tends to flow to the best-performing managers and away from the worst-performing managers, thereby achieving a more efficient allocation of capital.

The impact investing industry is still a few steps away from having a globally recognized impact performance benchmark. But there has been significant progress towards a practice benchmark–essentially a way for market participants to determine the extent to which impact investors are aligned with industry best practices for impact management.

This is now possible thanks to growing consensus on what constitutes best practices, largely driven by organizations and standards like the Impact Management Project (IMP), the Operating Principles for Impact Management (Impact Principles), and the SDG Impact Standards. Recognizing the importance of accountability, these standard-setters are also introducing independent assurance requirements, requiring impact investors of all shapes and sizes to find a reputable third-party to review and verify their impact management practices.

These verifications represent a data gold mine. Each new verification reveals interesting data and insights both about the impact investing firm in question but also about the impact investing market as a whole. The more verifications that are completed, the clearer the picture emerges of how many impact investors are following best practices versus which ones may be engaged in impact-washing.

Introducing the BlueMark Practice Benchmark

BlueMark was founded in January 2020 to meet the market demand for expert, third-party verification services that was created by the introduction of the Impact Principles. Each year, we publish a report with aggregated findings from the verifications we have completed to date.

In our second annual ‘Making the Mark’ report, we took the results of 30 impact verifications against alignment with the Impact Principles to create the BlueMark Practice Benchmark, a first-of-its-kind tool designed to root out impact-washing and help market participants readily differentiate between Practice Leaders and Practice Learners. This Benchmark is composed of three distinct categories.

  • Practice Leaders – Practice Leaders represent the top quartile of our sample (75th percentile and above). These standard-bearers implement all of the core elements of impact management, as well as several leading-edge practices that may go above and beyond the requirements of the Impact Principles, though they often still have discrete areas for improvement.
  • Practice Median – The Practice Median reflects the impact management practices of the median impact investor in our sample (50th percentile). Investors at the Practice Median implement many of the core elements of impact management, but also have significant room for development.
  • Practice Learners – Practice Learners are in the bottom quartile of our sample (25th percentile and below). These investors may have good intentions, but they lack many core impact management practices to generate positive impact. Many are early in their impact investing journeys, while others have yet to embed impact considerations at key stages of the investment process.

By categorizing impact management practices in this way, we have created a tool for impact investors to benchmark themselves against their peers. Our hope is that the Benchmark motivates Practice Learners to improve and Practice Leaders to continue innovating and further raising the bar for best practice. What it takes to become a Practice Leader will change over time as new practices and standards emerge, driving a race towards ever better management of impact investing practices.

ChartDescription automatically generated

This chart shows the aggregated ratings of investor alignment with the Impact Principles based on BlueMark’s first 30 verifications. The chart is divided up into three distinct categories–Practice Leaders, Practice Median, and Practice Learners–creating a mechanism that impact investors can use to benchmark themselves against their peers and to learn from others in the market.

Just as financial benchmarks have helped bring more transparency and accountability to different strategies and asset classes, thereby unlocking institutional capital flows, we believe an impact practice benchmark is essential to the continued institutionalization and maturation of the impact investing market. And as the impact verification market grows from dozens of independent verifications to hundreds or even thousands of verifications, the more data we will have that can be used to differentiate between the many investors now investing for impact.

Christina Leijonhufvud is the CEO of BlueMark, Tideline’s new verification business. She manages all aspects of business strategy, new product development, and external relations, and has directly led 30+ impact verification assignments across investor types and asset classes.

A video recording of “How to accelerate confidence and transparency through Impact Classification and Impact Verification” (WATCH)

A video recording of “How to accelerate confidence and transparency through Impact Classification and Impact Verification” (WATCH)

As more impact funds are introduced in the market, asset managers and asset owners need frameworks to help sort and segment funds by their distinct approaches to impact, or “impact classes,” just as they do by asset classes. They also need those impact classifications independently verified.

On March 3, 2020, the IMP+ACT Classification System (ICS), which was launched in June 2020 and has already been adopted by more than 100 asset managers who “classify” themselves according to either the SDGs and/or the Impact Management Project’s ABC framework, hosted a virtual event for impact investors to discuss “How to accelerate confidence and transparency through impact classification and impact verification.”

Watch a video recording of the event here to learn more about how the combination of impact classification and impact verification can bring greater transparency and accountability to the impact investing market, featuring a case study jointly presented by BlueMark, a provider of independent impact verification services, and ICS user and working group member Closed Loop Partners, an investment firm focused on building the circular economy. Those who missed the event can download the case study here.

Speakers included:

  • Anna Marciano – Head of US Legal Sustainability, Nestle USA
  • Christina Leijonhufvud – CEO, BlueMark
  • Claudia Coppenolle – Co-Founder & CEO, IMP+ACT Alliance
  • Tazia Smith – Managing Director, Closed Loop Partners
ImpactAlpha – “Why the impact investing industry is ready for a practice benchmark”

ImpactAlpha – “The next building block for impact investing: quality impact reporting”

This piece was originally published in ImpactAlpha.

The impact investing industry has matured over the past couple of years, especially when it comes to aligning investors around common standards for disciplined impact management practices.

The Operating Principles for Impact Management (OPIM) and the forthcoming SDG Impact Standards from UNDP, in particular, have created both clarity around the practices required to authentically integrate impact into each stage of the investment process and accountability for those practices through the encouragement or requirement of independent verification.

And yet with each advancement, another missing building block in the impact investment market is revealed. Attention has shifted to the imperative of impact performance reporting standards and, as with impact management practices, both clear standards and a mechanism for accountability are needed. Recent publications by leading sustainability and integrated reporting organizations like CDP, CDSB, GRI, IIRC and SASB; the IFRS Foundation; and the Global Impact Investing Network (GIIN) reflect efforts to define and harmonize both corporate and investor reporting standards.

Impact performance reports today come in all sizes and flavors, reflecting a lack of clarity and consensus on what constitutes quality impact reporting as well as efforts by individual investors to convey their own “secret sauce.” The state of play makes it difficult for asset owners and allocators to interpret the impact performance of their investments, much less to compare one impact fund to another.

Investors are in search of a better approach to impact reporting that incorporates relevant impact goals and metrics along with the qualitative information needed to communicate a holistic, yet digestible, portrayal of the impact of their portfolios.

While we collectively strive for more consistency and standardization, it’s important to keep in mind that robust reporting—whether on impact or financial performance—is both an art and a science, a balance of both qualitative and quantitative information. Impact reporting will always involve a degree of subjectivity, which makes the role of expert, third-party evaluation and verification critical to ensuring accountability, discipline, and comparability, three core pillars of BlueMark’s approach.

Introducing a way to verify impact reporting

In the absence of a universal or harmonized set of impact reporting standards, BlueMark has stepped up to introduce an impact reporting verification service to respond to market demand. We welcome feedback and comments from market practitioners as we seek to continue to refine our methodology to best meet the market’s needs.

Our approach draws on several leading foundational frameworks, including the GRI’s Sustainability Reporting Standards, OPIM, Impact Management ProjectIRIS+, and the SDGs, and encompasses both quantitative and qualitative information necessary for a complete and insightful picture of impact performance.

BlueMark’s approach is organized around five key characteristics of high-quality impact reporting. We can think about these elements as divided between two categories: the reporting framework, on the one hand, and the impact performance report, on the other. While an investor’s actual impact report may focus most heavily on the latter, both levels of information are needed for completeness.


  1. Context – Impact reporting should be supported by robust and clearly articulated portfolio-level and investment-level impact theories of change, including an analysis of the evidence base for the linkages between stated impact goals, assumptions, target outputs, and outcomes. The investor’s particular contribution to achieving impact should also be clearly developed.
  2. Relevance – The relevance of impact goals to the SDGs and underlying SDG Targets should be clearly established, drawing on industry frameworks such as the Impact Management Project’s A, B, C classification scheme. In addition, the reporting should take care to identify the stakeholders – including customers, the environment, local communities, and workers – who experience the positive and negative impacts of the investment strategy.

Performance report-level:

  1. Comparability – An impact report should use objective and transparent impact indicators, drawn wherever possible from industry standards, that allow for the analysis of impact performance over time, relative to expectations, and relative to other organizations. The proportionality of reported impact results to the scale of the investment should also be considered.
  2. Balance – An impact report should feature a discussion of both positive and negative impacts as well as impact and ESG risks. To achieve true balance, the report should also discuss instances of impact underperformance and unintended impacts and what lessons were learned as a result.
  3. Reliability – Impact data, which may come from both primary and secondary sources, should be collected and tracked in a way that drives data quality. Quality control practices should help to ensure that reported impact data is free of manipulation or errors and consistently defined and calculated.

We believe that impact reporting that incorporates these elements is worthy of a high mark, and we look forward to sharing specific examples in future articles.

Given the lack of common standards and dearth of historical impact performance reporting, even the most experienced impact investors are likely to have gaps or shortcomings in their reporting processes. Independent verification of these reports and the underlying systems can help spotlight areas of strength and where there is room for improvement, thereby providing LPs and other stakeholders with the assurance they need while also encouraging investors’ continued advancement towards best practices.

We see the future of impact reporting evolving in much the same way as financial reporting, with third-party verifiers such as BlueMark playing an important role in bringing greater accountability, discipline, and comparability to the market. As impact investors become more comfortable with reporting on a variety of both quantitative and qualitative inputs, the bar of ‘performance’ and best practices will rise across the industry.

Christina Leijonhufvud is the CEO of BlueMark, Tideline’s new verification business. She manages all aspects of business strategy, new product development, and external relations, and has directly led over 20 impact verification assignments across investor types and asset classes.