Impact investments address various challenges such as economic inequality, access to clean water and sanitation and have the potential to make significant contributions that positively impact our society. The principles for impact investments act as a reference against which the impact management systems of funds and institutions may be assessed. The principles are based on emerging industry practices from a range of impact asset managers, asset owners, asset allocators and development finance institutions. 

The report’s definition of investment includes but is not limited to equity, debt, credit enhancements and guarantees.  The term manager is used to refer to the asset manager, fund general partner or institution responsible for managing investments for impact. 

According to the report, the principles are based on five elements which include strategy, origination and structuring, portfolio management, exit, and independent verification. Under each of these five main elements there are nine principles that are designed to meet the requirements of different funds and institutions that are intending to achieve positive and measurable impact outcomes.

Asset owners can utilise these principles to either screen impact investment opportunities or ensure that their impact funds are managed in a robust fashion. Managers can also adopt these principles to manage those impact investments at corporate or fund level. Various tools, approaches and measurement frameworks may also be used to implement these principles.

Nine operating principles for impact management: 

• Principle 1: define the strategic impact objectives for the portfolio. Objectives should be aligned with an established framework like the sustainable development goals (SDGs). The impact objectives and investment strategy should be aligned and achievable. 
• Principle 2: establish a process that measures the impact performance of a portfolio that considers that impact achievement may vary across individual investments.
• Principle 3: establish the manager’s contribution to the achievement of impact. Provide a clear and credible statement through financial or non financial channels to indicate how each investment contributes to the achievement of impact.  
• Principle 4: systematically assess the expected impact of each investment through suitable measurement frameworks and indicators that are aligned with industry standards and practices.
• Principle 5: assess, address, monitor, and manage potential negative impacts of each investment. As a part of portfolio management, managers need to adopt a systematic approach to monitor environmental, social and governance (ESG) performance and mitigate the risks.
• Principle 6: Monitor the progress of each investment in achieving impact against expectations and respond appropriately. The actual outcome of every portfolio must be documented using relevant frameworks and compared to expected results to evaluate progress towards achieving positive impacts. 
• Principle 7: requires managers to maintain a code of conduct that is consistent with their fiduciary duties. 
• Principle 8: improve strategic investment decisions by reviewing the impact performance of a particular portfolio and identifying the gaps in the management processes.
• Principle 9: publicly disclose the alignment of impact management systems with the principles through regular independent verification reports. The outcome of these reports are subject to fiduciary and regulatory requirements and must be disclosed publicly.

1. Impact investments are investments made into companies or organisations with the intent to contribute to measurable positive social or environmental impact, alongside a financial return.
2. The principles and their overarching five elements define an end-to-end process for the management of social and environmental impact. The elements of the process are strategy, origination and structuring, portfolio management, exit, and independent verification.
3. The principles are based on two fundamental concepts: core elements of a robust impact management system and the transparency of signatories’ alignment with the principles.
4. Asset owners may use the principles to screen impact investment opportunities and/or ensure that their impact funds are managed in a robust fashion.
5. The principles may be adopted at the corporate, line of business, or fund level.
6. Managers that offer a range of investment strategies may adopt the principles for assets that they choose to identify as impact
   investments. Institutions and fund managers that only invest for impact may adopt the principles at the corporate or fund manager level.
7. ESG refers to three key factors when measuring the sustainability and ethical impact of an investment. Environmental factors look at how a company performs as a steward of the natural environment. Social factors examine how a company manages relationships with its employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, risk, shareholder rights, and stakeholder engagement.