The methodology evaluates the impact potential of financial products. The framework considers four widely documented mechanisms as follows:

• Grow undersupplied markets (G)
• Provide flexible capital (F)
• Engage actively (E)
• Signalling (S)

The IPAF model differs from other frameworks that choose to focus on other sustainability/impact dimensions. IPAF is exclusively based on publicly available information provided by the product manufacturers, and it is applicable to various types of financial products, including funds on public and private markets, deposits, and crowdfunding investments.

Rather than focusing on issuer-level impact data, which most financial products currently do not provide, the IPAF framework assesses each product based on its underlying strategy and its potential to generate real-life impact. The framework aims to counteract the risk of “impact washing” and produces a broader range of decision-making data for sustainable investors.

The IPAF has two steps in its methodology, the first assesses the impact potential of the product compartment to which the financial product belongs. The second quantifies the extent to which the product amplifies the full potential of its compartment. As a result, the IPAF gives birth to a new kind of data: investor-level impact data.

The report suggests undersupplied markets and the need for flexible capital are primary ESG-related concerns. The use of an incentivisation scheme, such as inserting impact-linked incentives within funding solutions, is an essential aspect of a financial product to foster positive change.

Another significant aspect of the report’s evaluation framework is the importance of active engagement with investees. The report suggests that investors should set specific objectives and milestones for their engagement and have a detailed escalation policy in case of unsuccessful engagement.

The IPAF provides a unique approach to assessing financial product sustainability, and it aims to fill gaps in current sustainability claims. The framework fills a necessary gap in providing information to investors to select and purchase genuinely impact-sensitive products, rather than investing in products that function only as impact-aligned products that do little to induce positive change.

In conclusion, the IPAF framework offers a valuable tool for retail investors, providing them with precise information on financial product sustainability. The framework fills the gap by providing clear and informative data to retail investors, allowing them to critically evaluate their investment choices in the light of real-life impact.