Introduction

This guide defines a Total Impact Portfolio (TIP) as an investment approach that integrates risk, return and impact across all asset classes. It positions impact as a core portfolio pillar alongside financial objectives. The guide provides practical direction for asset owners, foundations, family offices and institutional investors seeking to align capital with measurable social and environmental outcomes.

What is a Total Impact Portfolio?

A TIP evaluates the impact of every investment, applying strategies ranging from screening and stewardship to impact and catalytic investing. Unlike impact allocation models, it embeds impact across the whole portfolio.

The framework is grounded in double materiality, assessing both how ESG factors affect financial performance and how investments affect people and the planet. At minimum, a TIP seeks to avoid harm; at best, it optimises positive impact while maintaining financial discipline and diversification.

The case for TIPs: Why they matter now

The guide links TIPs to escalating environmental and social risks. The Global Risks Report 2024 ranks extreme weather and biodiversity loss among leading threats. The Living Planet Index 2024 reports a 73% decline in wildlife populations since 1970. Only 12% of Sustainable Development Goals are on track, with an estimated US$4 trillion annual financing gap.

Responsible investment markets are expanding. Sustainable assets totalled US$21.9 trillion across major regions in 2022, rising to US$30.3 trillion including the United States. In Australia, 86.6% of assets under management were invested responsibly in 2023. GIIN estimates the global impact investing market at US$1.571 trillion.

Retail investors, foundations, family offices and institutional asset owners are increasingly aligning portfolios with mission and beneficiary interests. Evidence cited indicates most impact investments achieve performance in line with expectations, challenging assumptions of concessional returns.

Challenges and barriers of TIPs

Key barriers include perceived trade-offs between impact and returns, limited internal capability, greenwashing risks and concerns about a restricted investable universe. The guide highlights industry data showing most impact investors report performance meeting or exceeding expectations.

Diversification across asset classes, including private equity, real assets and social impact bonds, supports risk management. Robust due diligence, recognised impact frameworks and third-party certifications are recommended to mitigate impact washing. Capability gaps can be addressed through specialist managers and industry collaboration.

How to construct a Total Impact Portfolio (TIP)

The guide outlines a structured process: define financial and impact objectives; undertake portfolio impact analysis; integrate Target Impact Classes alongside Strategic Asset Allocation; select investments through rigorous financial and impact due diligence; and monitor, manage and report performance.

Impact objectives should be embedded in the Investment Policy Statement. Investors classify assets using recognised frameworks, apply strategies such as screening and stewardship, and track financial and impact metrics to support transparency and accountability.

Case Studies

Australian and international foundations illustrate implementation. Wyatt Trust embedded impact criteria across its portfolio, investing in social housing and education. The Tony Foundation adopted a TIP approach, investing in homelessness and family reunification bonds.

The Paul Ramsay Foundation revised its Investment Policy Statement and committed capital to both market-rate and concessional impact investments. The Russell Family Foundation reports 94% mission alignment, targeting full alignment and net zero. PGGM applies a three-dimensional approach across €240 billion, combining screening, engagement and impact strategies.

Conclusion

The guide concludes that a TIP enables asset owners to integrate risk, return and impact across every investment. By embedding double materiality in governance, allocation and monitoring, investors can pursue financial objectives while contributing to environmental sustainability and social equity.