Introduction

The Responsible Investment Certification Program by the Responsible Investment Association Australasia (RIAA) supports a wide range of responsible investment strategies, with a focus on aligning capital with sustainable societal, environmental, and economic outcomes. This note specifically outlines how investment products using ‘impact’ in their labels can comply with the Responsible Investment Standard.

It distinguishes ‘impact investing’ from broader responsible investing by ensuring compliance with features established by the international impact investment community. The note references guidance from the Global Impact Investing Network (GIIN), particularly on differentiating between “sustainability-themed” and “impact” strategies. Impact strategies require an explicit theory of change, stakeholder relevance, and an explanation of real-world contribution.

Purpose of this assessment note

The note guides product issuers on demonstrating compliance with the Responsible Investment Standard, specifically Criteria 2 and Requirement P2, which mandate honest claims and appropriate labelling. This protects the integrity of already certified products and guards against greenwashing under Australian Consumer Law.

Product names must clearly reflect the responsible investment strategy and expected social, environmental, or sustainability outcomes. All claims must be substantiated, avoiding puffery and unqualified predictions.

Impact tests

Ten impact tests are applied to assess products seeking RIAA certification with an ‘impact’ label:

• Intentionality – Managers must state environmental or social issues targeted, supported by a formal impact thesis and verified in disclosure documents.
• Impact goals – Investment opportunities must align with stated impact goals. Public disclosures should demonstrate the coverage, particularly in multi-asset products.
• Company alignment – Each investee company must primarily deliver positive impact, with at least 50% of revenue from impact-generating activities. Up to 20% of assets under management (AUM) may consist of potential impact holdings, justified through published rationale.
• Risk and return – Managers must disclose whether impact takes priority or is equivalent to financial returns.
• Responsible exits – Managers should explain stock buy/sell decisions, including average holding duration. Reporting should be transparent and support responsible exit principles.
• Impact reporting – Impact performance must be reported annually, based on impact goals.
• Company impact reporting – Assessment of how each company contributes to the impact goal must be documented, including methodologies, assumptions, and use of frameworks like SDGs.
• Engagement – Managers should engage investees to enhance impact delivery, including strategic advice and board-level interactions.
• Undersupplied capital markets – If applicable, capital should be directed to underserved markets or relatively illiquid securities to enable access and stability.
• Financial contribution – Managers should demonstrate how financial mechanisms (e.g., secondary capital raisings) scale impact, particularly in listed equities where contribution is less direct.

Unpacking the impact tests

RIAA structures its approach to impact around three principles: intentionality, measurement, and contribution. These principles align with standards such as the Impact Management Project (IMP) and the IFC Operating Principles. The impact thesis must be public and outline how the portfolio addresses real-world challenges.

Investments must prioritise impact while ensuring at least annual disclosure. Measurement should include both outputs and outcomes and preferably be verified. Contribution is assessed through engagement, market development, and financial structuring.

Example

Two comparative fund examples illustrate assessment outcomes. One failed due to lack of embedded impact strategy, insufficient impact data, and misleading labelling. The compliant fund demonstrated explicit intent, measurable outcomes, responsible exits, and transparency in fund labelling.

Role of the CAP and the quality and thresholds tests

The Certification Assessment Panel applies Quality and Thresholds Tests (Q&TTs) to validate claims. CAP reviews whether products meet responsible investment consumer expectations and whether claims uphold industry credibility. Accurate and evidence-backed disclosures are essential to avoid misrepresentation.