During a focused and stimulating discussion, participants discussed their views of the future of impact investing as an opportunity comparable to, and as attractive as, traditional investments. Key topics included:

The “impact whisperers” and use of the “impact” label

Participants observed that some GPs have delivered impact-focused outcomes without using the impact label (which some referred to as “impact whisperers”). These have included, for instance, managers adopting brown-to-green strategies and healthcare investors seeking to drive access. In these situations, LPs had accessed impact through co-investment positions. Put another way, LPs valued the impact positioning and results of the underlying portfolio company, over the under-communicated impact positioning of the fund manager.

This highlighted the pros and cons of the impact label. While labels support mission signalling (therefore driving accessibility for LPs searching for appropriate impact opportunities), they can also carry the stigma of concessionary returns, as well as policy backlash.

Accordingly, participants discussed whether the market should adopt a more inclusive definition of “impact” to recognise these actors. However, taking too liberal a definition may risk diluting standards of intentionality and investor-level additionality.

The discussion raised whether a more mainstream positioning for “impact whisperers” would help to address challenges of data and scale. This may require specific resources to support investors in identifying, diligencing and engaging with them. Especially salient to this would be the ability of investors to assure themselves that the underlying co-investment or transaction has sufficient impact intentionality and measurement, and that the fund manager would play its part in upholding and advancing impactful company-level practices.

Institutionalisation of impact investing 

Bringing impact investment into the mainstream will depend not only on attracting new entrants to the market, but on retaining and re-upping existing investments to sustain commitments and support emerging managers to achieve scale.

Some participants discussed internal orientation as the hardest market barrier to shift, with the market following a bell curve for impact investing adoption.

Participants were highly energised in discussing challenges and opportunities in the data pillar, expressing an appetite to engage on impact metrics. Addressing inherent tensions between standardised, comparable metrics and more granular, context-specific data, was noted as a core challenge. Incremental progress on impact data could come from small coalitions of investors agreeing on theme- or region-specific standards such as healthcare metrics among US-based LPs.

Moving forwards: the value of partnership

Overall, the discussion highlighted the opportunities delivered by portfolio companies in the impact space, whether or not this label was formally applied, but this also revealed the core challenges in reporting against and evidencing impact to help LPs consider committing additional capital.

The roundtable proposed several distinct opportunities for ILPA to lead on market institutionalisation efforts, including developing standardised educational materials to help GPs understand the case for impact, and facilitating opportunities for LPs committed to impact to work through practical challenges.

While it is clear that the impact investing landscape continues to evolve, the discussion demonstrated that there is appetite and will to bring impact outcomes to a wider institutional investor universe. Alongside our valued partners, we look forward to seeing how the market develops in the months and years to come.

Impact investing should not be considered without regard to its associated risks, which include challenges relating to impact definition and measurement, data availability and comparability, regulatory and policy developments, as well as execution risks that may affect both financial and non-financial outcomes.