0 Planning

This guide is structured around the five key stages in the process of impact investing — from the initial screening, to in-depth analysis, and on to making investment decisions and deals, monitoring and evaluating investments, and reporting upon the impact generated. Prior to entering into this process however, investors in the early stages of setting up a fund will need to spend a little time thinking about what they want to achieve through their investments, and about their mission, focus and approach. Establishing these will guide the investor when it comes to making decisions around:

  • what sectors, outcome areas, and geographic locations to be active in
  • what beneficiary groups to reach out to
  • the balance of interest among direct impact upon beneficiaries, wider impact upon communities, sectors and society at large, and investor impact upon social purpose organisations
  • the objectives of individual investments
  • the balance of interest among newer approaches to impact, and more established methods, and the overall appetite for impact risk

Finding the answers to these questions will serve to hammer out the essentials of impact investment planning.

A useful way to get started is to work through the five stages of best impact practice, asking yourself the questions implied by the concepts, terms and processes involved in each stage. Familiarising yourself with the mechanics of what making impact investments entails will lend much richer definition to your approach. It will also make apparent some of the structures and resources you will need to put in place to go about your impact investing activities. For funds, this typically includes:

  • an investment team that understands the essentials of impact measurement
  • some in-house expertise regarding impact analysis (either within the investment team, or active in supporting it)
  • a person with a Head of Impact role (if not a full time position, this responsibility is nevertheless clearly assigned to someone, and included in their job description)
  • an investment committee with diverse membership, including social and investment expertise, with members who are able to read impact reports, understand the key parameters at play, and integrate impact into the making of reasoned investment decisions

For funds and investors that are already active, it is important to revisit the impact investment plan regularly in response to results, and review how effective operations are proving. This includes asking:

  • does the plan provide clear guidance in making decisions?
  • is it proving too restrictive, and thereby limiting efficacy?
  • have there been advances in the sector (regarding e.g. specific techniques, best practice, new technologies) that the plan should respond to and incorporate?

An effective treatment of impact provides investors with valuable information that can inform and influence planning for the future. If your plan doesn’t respond to the performance indicated by your results, then unless the original plan was perfect, it is likely your processes are failing to capture some things that it would be useful for you to know. Again, working through the best impact practice guidance laid out here can be a powerful way to investigate if there is something missing.

The impact plan section of this guide sets out the essential structure by which a social purpose organisation generates and measures its impact. The primary purpose of the impact plan section is for investors to familiarise themselves with this structure, and to use it in working through the impact plans of investee organisations for analysis purposes, and for ongoing monitoring and evaluation. But it can also be useful to investors to think through the impact plan self-reflexively, and compare it with their own mission, activities, and the ultimate impact they are generating.

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