Week 5

Question 1

What is impact due diligence (IDD)?

Answer 1

Ongoing & dynamic screening of enterprises’ operations for:

• Effective decision-making and risk management.
• Prevent causing or contributing to make harm to people and the planet.
• Track implementation of enterprises’ operations to mitigate potential risks.
• Effective stakeholder engagement and investor relations.
• Evaluate link to theories of change.

Question 2

Why is IDD important?

Answer 2

Entrepreneurs need to communicate effectively about impact, governance and finance

Need to understand that the company has a clear path to profitability and impact:
* What is the impact or impact potential
* Where was the company before
* Where is the company now
* Where is the company heading
* Use of funds
* Non-financial support required
* Team

Question 3

What are possible results from engagement (in example: Correlaction)

Answer 3

Results of our engagement as active impact investor in the development of the enterprise:

• Communication between entrepreneur and investors. Transparency.
• Clear path to profitability.
• Clear communication about impact, finances and governance.
• Team less stressed.

Question 4

What are possible challenges (example: Correlaction)

Answer 4

• Bureaucracy.
• Time and resources.
• Multitasking.
• Relationship with management team.

Question 5

Name the 6 maintakeaways of IDD

Answer 5

• Impact investing requires that we think differently about investments if we want to create systemic positive change.
• Investor’s engagement is valuable (if not required).
• Impact due diligence and monitoring should be done throughout the entire process of enterprise building and investment phase.
• Before getting into the measurement of impact, as investors we need to have a clear goal and understand what impact we want to achieve. Then we know what to measure and why.
• Do we need to standardize metrics to measure?
• Is reporting the only way of communicating about impact?