Impact investment is now a multi-trillion dollar equity and credit industry, growing in excess of 30% per annum, delivering outsized returns to investors and positive environmental and social outcomes.

It’s no wonder that asset owners are increasing their allocations to impact, and those commitments are going to the asset managers, who, as well as having a credible investment performance track record, are equipped to invest for impact, and can communicate this.

Many asset managers are well on their way, many more are not there yet. It’s not a complex path — below are the key steps that a private equity investor might consider to better attract impact funding.

Optimising for impact will likely lead to outsized returns (and attract top talent). Investors know this. You just need to help them find you and allocate to you by positioning yourself as an impact leader.

1. Set and communicate a few clear overarching impact goals, both environmental and social.

Leverage your existing experience and expertise and just adjust or augment for impact. Impact can be achieved in all sectors, geographies, and strategies. Agree which impact goals (e.g. financial inclusion, carbon emissions reduction, education equity) are important to you and look for ways to deliver on them through investment. Then communicate those overarching goals.

2. Decide on the measurement tools and metrics, communicate them, and stick to them.

There are many impact measures to choose from, with reporting standards harmonising IFRS’s ISSB. IRIS+ is a recognised tool for measuring impact. Choose an auditor or certifier (e.g. BlueMark) to measure and verify your impacts from the first engagement through to exit. Important to stick to the same measures to enable analysis over time. Share this detail with all your stakeholders.

3. Appoint a Chief Impact Officer and empower them as a leader in the firm.

Almost every organisation committed to impact achieves this through dedicated senior resources and a clear signal from the very top of the firm that impact is core to the business. Everyone in the firm, and all other stakeholders, need to know that impact is critically important to the leadership. Signalling this commitment will also help you recruit the strongest talent into the firm.

4. Embed impact goals and measurement into all your processes.

Show that you mean it and include impact in all your processes to ensure your impact vision leads to results. Include impact across constructing a shadow portfolio, to due diligence, portfolio company incentives, staff incentives, promotion criteria, reporting, and broader communications.

5. Add impact outcomes into the incentive schemes.

More and more GPs offer alternative incentive schemes to LPs where 10–50% of the carried interest is released based on impact scores. Also, align this with portfolio companies’ management incentive schemes. Most LPs welcome this option and advanced impact allocators will require it. You don’t have to solve all the world’s issues, just demonstrate positive impact through your own investing.

6. Brand yourself as an impact leader.

After delivering on steps 1–5, you have won the right to position yourself and your organisation as an impact leader. Impact leadership requires you to share your own success stories and to support those laying the path for the growth of impact investment through sponsoring research and testing new ideas and products. These actions will all reinforce your positioning as an impact leader, in turn attracting more capital to you.