Illusionist, Learner, Achiever or Champion: What kind of impact fund manager are you?

Imagine an institutional investor evaluating potential funds for investment. After extensive due diligence, they shortlist three funds that offer comparable risk-adjusted financial returns, along with robust impact practices and high impact potential. 

To assess impact performance, the investor reviews the fund managers’ latest impact reports—if available—only to find inconsistent structures and content. Some reports read like promotional materials, filled with compelling stories. Others take a data-heavy, accounting-like approach to impact metrics. 

With each manager interpreting and communicating impact in their own way, how can the investor decide which fund to invest in?

An experienced investor with in-house impact expertise is likely to conduct impact due diligence and make the investment decisions directly. In other cases—more common in practice—investors often rely on an impact partner to evaluate the fund’s impact considerations and performance.

At Phenix, we’ve conducted numerous on-site and desk-based impact due diligence assessments across asset classes and markets on behalf of large institutional investors. 

Drawing from this experience, we developed the “Four Faces of Impact,” a matrix designed to classify managers through a comprehensive assessment of their funds.

• The horizontal axis: Impact storytelling. This reflects the fund manager’s ability to effectively communicate their impact narrative, whether through impact reports, qualitative stories, or other forms of storytelling, verbal or visual.
  
  Our experience indicates that the extent and form of storytelling are influenced by both the asset class (for example, private versus public markets) and regulatory and political developments. Furthermore, some institutional investors need to communicate their impact narrative in a simple way to their stakeholders – such as board members and pension beneficiaries – who often have limited or varying levels of understanding of impact concepts.
  
  For more on impact storytelling, read “Does storytelling have a role to play in impact reporting,” by Matt Ripley of Impact Frontiers on ImpactAlpha.
   
• The vertical axis: Impact potential and foundation. This covers three key dimensions: impact practice, performance reporting and impact potential. It reflects the strength and alignment of impact practices and performance reporting with leading market standards and guidance, such as the “Impact Principles” and “Impact Performance Reporting Norms.”
  
  Furthermore, it considers the fund’s potential for scale and depth of impact, often evaluated using the Impact Management Project’s “Five Dimensions of Impact”. The degree of alignment across these dimensions also varies depending on the asset classes.  

Fund manager archetypes

The resulting 2×2 chart identities four archetypes to classify fund managers at a specific point in time. As managers often oversee multiple funds, their classification may vary depending on the specific fund being evaluated. While many managers aspire to be Impact Champions, the reality exists along a spectrum.

In our experience, we often encounter The Silent Impact Achievers, The Impact Learners, and the Impact Illusionists – each on their own unique impact journey.

Face 1: Impact Champion (Top right) 

• Key characteristics: Fund managers with high impact potential, robust impact practices, transparent and comprehensive reporting, and a compelling impact narrative. 
• Potential for investor contribution: Include these managers in your portfolio to maximize contribution to positive social or environmental impacts.

Face 2: Silent Impact Achiever (Top left)

• Key characteristics: Fund managers with high impact potential, robust impact practices, and transparent reporting, but ineffective impact storytelling. 
• Potential for investor contribution: Support these managers in improving their storytelling to better highlight their impact.

Face 3: Impact Learner (Bottom left)

• Key characteristics: Early-stage fund managers with lower impact potential, developing impact foundations, and an underdeveloped impact narrative. 
• Potential for investor contribution: Help these managers in adopting best practices, strengthening their impact foundations, and crafting a compelling impact narrative.

Face 4: Impact Illusionist (Bottom right)

• Key characteristics: Fund managers with strong storytelling skills but weak impact foundations, potentially creating the illusion of impact (“impact washing”) without delivering positive outcomes. These fund managers are often thematic (e.g., decarbonization) or ESG and sustainability focused. 
• Potential for investor contribution: Engage with these managers to mitigate the risk of impact washing by supporting them in building strong impact foundations and by carefully selecting investment opportunities.

Risks across the matrix

This classification of fund managers also offers insights into impact risks. The Impact Management Project’s Five Dimensions of Impact defines impact risk as the likelihood that impact will be different than expected. The framework classifies it into 10 types – such as risks related to the strength of evidence, and the extent to which community needs are considered. In our experience, the probability of impact risks – such as evidence risk – increase as we travel from Impact Champion to Impact Learner or Illusionist on the matrix. 

The “Four Faces of Impact” matrix offers a practical lens for navigating the diverse landscape of fund managers. By recognizing these archetypes, investors can prioritize greater transparency and accountability in their impact due diligence, ultimately encouraging managers to strive to become Impact Champions. 

We believe this will contribute to a future where more fund managers evolve into Impact Champions, making this a norm rather than an exception.

Daniel Moreno is a manager selection specialist for impact investments and Mohit Saini is an impact measurement and management specialist at Phenix Capital.