Impact investing is different from traditional investment. It has dual objectives of both financial and impact returns. The types of investment that impact funds or funds incorporating impact make are different and need to be sourced, screened and reviewed differently. This section provides guidance on how to do that focusing both on general principles as well as more detailed processes that you might want to use.

How to use these resources

Managing impact investments well requires the construction of portfolios that align with the impact investment thesis and where the assets have been selected to build a portfolio with the appropriate risk/return profile – both from a financial and an impact perspective. Start with the reading on planning, mapping and screening and then move onto the readings on deal sourcing and fund manager selection before getting stuck into the readings on due diligence (one brief, two longer and rooted in experience).

Resources

Screening and suitability – how to identify true impact investing opportunities (spot “green washing”), source them and assess their suitability 

The Good Investor - Planning, screening and mapping (opens new window)

Investing for Good

Reading time: 20 minutes

Practical guidelines on how to plan an impact fund. Screening considers how to refine the pipeline of investment and be clear about the purpose and focus of the fund. Mapping helps understand eligibility and suitability for investment.

What the reviewer found helpful: “Written in 2012 but still feels highly relevant and refreshingly practical.” Chris Cullen

intermediate
Guide for Impact Investing Fund Managers: Deal Sourcing and Selection (opens new window)

Global Impact Investing Network

Reading time: 10 minutes

This article provides practical guidance for funds looking to source and select impact investing deals with potential investees. It touches on how funds can market and present themselves effectively, and what to consider when evaluating potential investees. A list of key questions is provided as a starting point for criteria that should be featured in any strategy funds developed for narrowing down their investment opportunities.

What the reviewer found helpful: “Great insight into the key considerations for funds looking to source potential impact investees”   Yinni Hu

advanced
How to evaluate impact investing fund managers (opens new window)

World Economic Forum

Reading time: 40 minutes

WEF proposes an alternative approach to adopt when evaluating impact managers in light of the evolution as opposed to the ‘traditional’ approach of due diligence focused on the fund manager’s track record The alternative approach put forward by WEF centres around asking critical questions about how: People: How are decisions made and by whom?; Mission: How does the fund manager combine impact and finance? ; Business model: How does the fund finance its operations?; and Practised governance: How is the fund organization actually governed?

What the reviewer found helpful: "The analysis under each element of the proposed alternative approach" Kate Munuka

introductory

Due diligence mechanisms and challenges

Guide for Impact Investing Fund Managers: Conducting due diligence (opens new window)

Global Impact Investing Network

Reading time: 7 minutes

Discusses the importance of a standardised due diligence process and why it is helpful. Suggestions for key questions an investor should ask to help manage risk.

What the reviewer found helpful: “Notes the value of an impact committee to ensure impact risk is considered in depth.” Chris Cullen

introductory
Impact due diligence guide (opens new window)

Pacific Community Ventures

Reading time: 60 minutes

This is a comprehensive and detailed guide intended for developing and implementing due diligence processes that assess anticipated impacts. It includes detailed recommendations, case studies, example questions and key considerations for various steps in the due diligence process, and provides a framework for incorporating impact measurement and management in the processes leading up to making impact investments. The report includes a combination of theoretical guiding principles and practical, technical and process-related guidance.

What the reviewer found helpful: “While being a long and comprehensive report, the paper is logically divided into clear sections, making it easier for impact investing practitioners to find the most relevant information for them.”   Yinni Hu

advanced
Impact Assets Handbook for investors (Chapter 7) (opens new window)

Jed Emerson

Reading time: 2-3 hours

Provides a framework and tools for investors to adopt and adapt to develop a due diligence process and analyse investment opportunities in the impact investing space

What the reviewer found helpful: "The framework and analysis include both financial and impact considerations." Kate Munuka

intermediate