One of the most common items on the “wish lists” that asset allocators have shared with our BlueMark colleagues: Are there better ways to evaluate whether a fund is focused on meaningful indicators and setting appropriately ambitious goals?
Our interviews revealed that most allocators have clear impact objectives for their portfolios. Our hypothesis is that ‘impact track record’ is not regularly factored into allocator decision making—not due to lack of interest, but because the necessary tools do not yet exist in the market. The current tools and processes often place limited emphasis on impact success factors.
To better understand current practice, BlueMark analyzed the manager research, screening and scoring approaches of 40 allocators, using a combination of direct interviews with over 30 allocator representatives and deep dives into 10 unique fund assessment or scoring tools. The diverse group included institutional asset owners, wealth managers, funds of funds, investment advisors, and development finance institutions, or DFIs.
A clear directive: Adoption of common criteria to assess the basics would allow them to redirect their focus to more strategic considerations. With a streamlined way to assess the “basics” about impact funds, asset allocators could direct more of their attention to issues specific to their unique strategic priorities.
Even more importantly, alignment around a core set of standard criteria for evaluating impact funds would result in more fulsome and transparent capital allocation decisions.
Our interviews indicated that allocators are hungry to move beyond assessments of impact monitoring processes and more systematically interrogate prior and expected future impact results as part of manager research. This review shows that the time and resources currently spent by allocators on custom approaches to vetting impact managers could be more strategically and efficiently directed.
A common ‘impact track record’ baseline could substantially reduce the diligence and reporting burden faced by fund managers too. Fund managers could spend significantly less time answering duplicative investor questions, freeing up more time to invest in and support the performance of impactful companies.
Most of the allocators we interviewed acknowledge the need to reduce the ongoing reporting burdens of the managers they support. However, they tend to overlook the opportunity to streamline the information demands managers face during fundraising. Impact allocators would do well to take a page from the playbook of other efforts to harmonize diligence frameworks (e.g. the due diligence questionnaire for the Institutional Limited Partners Association).
Moving towards standardization would allow investors to align on what really matters when it comes to impact fund selection. Greater alignment would also enhance comparability across peer funds.
Common toolkit
Asset owners and allocators today rely on a wide variety of tools and frameworks to evaluate fund managers, with most focusing on financial track record and return targets as the main proxies for expected performance.
However, when it comes to evaluating impact fund managers, there’s still significant inconsistency in how investors and advisors evaluate potential and actual impact—and which factors they prioritize in a holistic analysis. A 2024 GIIN survey showed that “comparing impact results to peers” is a challenge for 87% of impact investors.
While impact-orientated allocators differ in strategy and style, our analysis revealed that their approaches to fund selection are remarkably similar—often involving the same core questions, albeit with varying levels of depth.
We also found consistency in the criteria not considered, suggesting that there are common blind spots across the industry when it comes to manager research.
How do asset allocators assess impact funds? Aligning around a core set of standard impact screening criteria could drive greater efficiency and effectiveness for fund managers and allocators alike.
In our review of scoring tools, the most notable areas of commonality and difference can be organized across standard stages of fund management, from pre-assessment to governance to performance monitoring and reporting.
- Impact criteria:
- 70% of the tools reviewed award points based on a manager’s process for assessing the potential impact of prospective investments.
- Of these, 42% take the next step to interrogate the depth of that assessment, reviewing what factors are included, how thorough the process is, and how consistently it’s applied across investments.
- Impact governance:
- 80% of the tools reviewed check whether the manager weighs impact factors as part of their decision-making process. However, only one allocator assesses whether investment committees include meaningful representation by an individual responsible for impact.
- Very few allocators (20%) either systematically screen for impact expertise on the team or evaluate whether the fund employs impact-linked incentives for their staff.
- None of the tools reviewed considered whether the fund manager has protocols related to responsible exits.
- Impact monitoring:
- 80% of the tools reviewed check whether the manager regularly monitors impact performance, but only 40% of those interrogate the approach to doing so (e.g., how fund managers determine which metrics to monitor, whether performance data is monitored over time or against targets, etc.).
- Only 20% of the tools reviewed award points based on whether the fund manager engages with end stakeholders or beneficiaries as part of their approach to impact monitoring.
- Impact reporting:
- All the tools reviewed had criteria based on the manager’s ability to consistently report impact data.
- Only 20% of the tools reviewed assessed whether a manager has clear quality control mechanisms to verify that the data reported is accurate and reliable.
Over the past two years, BlueMark has conducted significant research and stakeholder consultation towards the development of a fund impact rating tool – the Fund ID. We designed the criteria to be transparent and broadly applicable, drawing on industry standards and principles.
After mapping our methodology to the scoring approaches discussed in this piece, we’re confident our tool meets market needs—rigorous enough for comparison and benchmarking across diverse funds, yet flexible for customization. As we continue refining our approach, we welcome engagement from a wide range of stakeholders and are open to challenges and alternative perspectives.
Paige Nicol is senior director at BlueMark.
