The ‘London Principles’ on Impact Investing

The global Impact Investing Policy Collaborative (IIPC) has published a set of guidelines to inform worldwide government policy on impact investment.  

The Impact Investing think tank released the ‘London Principles’ at its third annual conference in the UK earlier this month.

Clarity of Purpose, Stakeholder Engagement, Market Stewardship, Institutional Capacity and Universal Transparency were the key factors spotlighted as requiring government attention.  

“The London Principles are designed to support a reflective approach to policy that drives learning and innovation over time to achieve important social objectives,” the preamble stated.

“They do not dictate what a government should do, but rather offer guideposts that ideally point to better strategy and policy development.

“The London Principles are drawn from a multitude of political, economic, and cultural contexts, and have been developed to address different places across varying stages of impact investing ecosystem development.”

The IIPC seeks promote impact investing markets through development of a global network for policy research and innovation. It brings together researchers, public officials, advocates, and investors from over 20 countries.

Held at rotating international locations, this year’s conference was hosted by the Skoll Centre for Social Entrepreneurship and was held at the University of Oxford and also in London.

The guidelines were drafted by a core group of 30 IIPC members and were  finalised by a larger group of stakeholders in the later stages of the event.

The IIPC Advisory Council integral in the process included two representatives of Australian organisations: Rosemary Addis from the Department of Education, Employment and Workplace Relations and Les Hems from the Centre for Social Impact.

A summary of the London Principles:

Clarity of Purpose

Governments should:

• Identify the social objective(s)
• Identify why the policy might be an appropriate tool to meet those objectives
• Define realistic expectations for the potential results and the timeframe they might be achieved in

Why?

Avoids inefficient use of resources, insufficient policy support that affects the achievement of outcomes, and non-cohesive policy regimes.

Stakeholder Engagement

Governments should:

• Identify and collaborate with key stakeholders throughout the policy design and implementation process.
• Support shared ownership of policy and ‘a dynamic process of policy development and review.’
• Avoid misaligned incentives or unequal power structures that counter effective policy.

Why?

Dialogue with stakeholders manages expectations and avoids the development of ineffective policies. Governments can also bring important additional resources to support impact investing policy.

Market Stewardship

Governments should:

• Identify the appropriate use of market interventions
• Develop markets holistically
• Support reliable and responsive policy that is stakeholder-conscious

Why?

Effective market stewardship sets appropriate levels of regulation and cuts out unnecessary management of market activity.

Institutional Capacity

Governments should:

• Determine the cross-sector resources within government needed for successful policy.
• Develop public sector leadership to implement policies where needed and provide stability.
• Measure and evaluate the impact of policies against stated objectives, and adjust policy accordingly.

Why?

Institutional capacity promotes the effective use of resources, adds value to existing policies, and creates the potential for developing innovative strategies and tools that address key social problems. Institutional capacity establishes reliable and resilient markets, and avoids sending mixed signals to investors and civil society on the potential for intended policies to deliver on their promises.

Universal Transparency

Governments should:

• Report thoroughly on performance and develop a culture of transparency.
• Commit to processes of shared learning, including open dialogue on successes and failures.
• Promote adherence and engagement with stated social objectives.

Why?

Effective universal transparency enables leadership in public innovation, protects against bias, realistically manages expectations, and empowers citizen participation.