“Enterprise readiness” is commonly recognized as a precondition for an effective impact investment. It turns out investors as well could benefit from some support before they jump straight into impact investing with their advisors.

Investor needs vary, of course, depending on type. For instance, family offices don’t always recognize the value of such education and strategy-setting services — and may not be accustomed to paying for them.  On the other hand, private foundations tend to be more cognizant of the need for a deeper level of preparation, given their natural interest in designing impact investment approaches that are tightly aligned to their mission and philanthropic areas of interest. However, they too need patience in working with their advisors to develop the tools and processes required to prepare and execute impact investment strategies.

Finally, the advisory needs of institutional investors are quite distinct. They tend to draw on internal research and strategy functions to answer the early education, alignment and strategy-setting questions, and turn outwards primarily for investment sourcing and other execution services.

A well-functioning impact investing market requires that investors of all types make use of the following levers:

  1. Investors should seek clarity and transparency on what they don’t know.
  2. Investors should demand transparency from their advisors regarding their capabilities across the various stages of investment.
  3. Investors can share learnings, tools and frameworks to advance peers’ understanding of what works and what doesn’t in working with advisors.
  4. Investors can help build the intermediary market by engaging directly with advisors, including by: writing Requests for Proposals (RFPs), which can be a useful exercise for clarifying requirements and comparing intermediary services.

By approaching the market with more clarity, confidence, and creativity at the outset, investors will be better prepared to achieve their impact investing objectives.

Read the full article about impact investing by Christina Leijonhufvud at ImpactAlpha.