Disclosure Statement: Second Annual Update
Operating Principles for Impact Management
International Finance Corporation
October 27, 2021
The International Finance Corporation (IFC) is a founding signatory to the Operating Principles
for Impact Management (the Impact Principles). The Impact Principles provide a reference point
against which the impact management systems of funds and institutions may be assessed. They
draw on emerging best practices from a range of asset managers, asset owners, asset allocators,
and development finance institutions.
This Disclosure Statement affirms that IFC’s core/client business, including (a) impact
management systems; (b) policies and practices; and (c) investment services (including debt,
equity, trade and supply chain finance, asset management, syndications, derivatives andstructured finance, and blended finance instruments) are managed in alignment with the Impact
Principles. Total assets under management in alignment with the Impact Principles is US$86,355
million1 as of June 30, 2021.2 3

Makhtar Diop
IFC Managing Director
1

Includes the following amounts:─ Portfolio exposure (includes debt, equity, trade and supply chain finance, derivatives, and structured finance in
IFC’s own account investment portfolio; exposure is defined as the sum of the (i) committed exposure for IFC’s
debt investments, (ii) fair market value of IFC’s equity investments, and (iii) total undisbursed equity
commitments): $64,092 million as of 6/30/2021.
─ Syndications third-party investor portfolio (includes B Loans, agented parallel loans, Managed Co-Lending
Portfolio Program loans, A Loan participations, unfunded risk participations, and credit insurance policies):$15,658 million as of 6/30/2021;
─ IFC Asset Management Company (composed of equity assets under management): $4,172 million
as of 6/30/2021; and─ Blended finance (blended finance resources applied to investment projects): $2,433 million, as of
6/30/2021.
2
Excluding liquidity management.
3
The sole purpose of this Disclosure Statement is to fulfill IFC’s obligations pursuant to Principle 9. This
document shall not constitute and should not be construed as an offer, solicitation or invitation to buy or sell any
securities, financial instruments or services whether described herein or otherwise, or as any prospectus orinvestment- related advice in relation thereto, nor is it intended to form the basis of a decision to participate inany investment. IFC makes no guarantee or other promise as to any outcomes, including any financial ordevelopment impact results that may be obtained from the practices disclosed in this statement. While past
performance may be analyzed in this Disclosure Statement, past performance should not be considered indicativeof future performance. Accordingly, IFC shall not have any liability to any of the recipients of this DisclosureStatement, nor to any other party in connection with or arising in any way from, or in relation to, the informationor any opinions expressed in this Disclosure Statement, and IFC does not accept any responsibility whatsoever
for any action taken, or omitted to be taken by any party on the basis of any matter contained in, or omitted from,the Disclosure Statement.

Principle 1 – Define strategic impact objective(s), consistent with the investment strategy: The
Manager shall define strategic impact objectives4 for the portfolio or fund to achieve positiveand measurable social or environmental effects, which are aligned with the Sustainable
Development Goals (SDGs), or other widely accepted goals. The impact intent does not need
to be shared by the investee. The Manager shall seek to ensure that the impact objectives andinvestment strategy are consistent; that there is a credible basis for achieving the impact
objectives through the investment strategy; and that the scale and/or intensity of the intended
portfolio impact is proportionate to the size of the investment portfolio.
•

IFC – a sister organization of the World Bank and member of the World Bank Group (WBG)– is the largest global development institution focused exclusively on the private sector indeveloping countries. The WBG has set two goals it aims to help the world achieve by 2030:
end extreme poverty and promote shared prosperity in every country.

•

Through direct investment services, IFC provides private sector solutions that lay thefoundation for sustainable and inclusive economic growth.

•

IFC formulates country strategies to define areas of focus and deployment of resources toaddress development challenges in individual countries. IFC also develops global sector
strategies to inform how the Corporation engages in specific sectors in general, which theninforms how IFC focuses on these sectors at the country level. Underlying these country andsector strategies are a suite of country and private sector diagnostics and analytical work,
which focuses on identifying constraints to private sector investment and operations.

•Throughout the investment decision-making process, the delivery of development impact is a
key factor in IFC’s project selection and design criteria5. Specifically, IFC’s development
impact rating system, the Anticipated Impact Measurement and Monitoring (AIMM) system,
helps IFC consider the quantum of impact expected from a prospective investment decisionin the context of the relevant development gap the country faces.

4

Impact objectives can be defined as the intended impact that contributes to financial, institutional, social,environmental, or other benefits to a society, community, or group of people via one or more investment. Adaptedfrom OECD-DAC (www.oecd.org/dac/).
5
See footnote 3.

2

Principle 2 – Manage strategic impact on a portfolio basis: The Manager shall have a process
to manage impact achievement on a portfolio basis. The objective of the process is to establish
and monitor impact performance for the whole portfolio, while recognizing that impact mayvary across individual investments in the portfolio. As part of the process, the Manager shallconsider aligning staff incentive systems with the achievement of impact, as well as withfinancial performance.
•

IFC pursues a “portfolio approach” that guides project selection and design. The portfolio
approach allows IFC to achieve its development objectives and maintain financial
sustainability, recognizing possible trade-offs between these objectives across projects. The
AIMM system is an integral tool for IFC to pursue the portfolio approach.

•

IFC manages its performance through a corporate scorecard which is cascaded into
departmental scorecards and objectives for Vice Presidents, Directors, Managers, and staff.
The scorecard includes targets for portfolio financial and impact performance, the lattermeasured by average AIMM scores. Departmental awards are linked to the achievement ofscorecard targets. Corporate performance awards provide additional incentives for deliveringhigh-impact transactions.

•

To further align IFC’s investment processes with Principle 2, IFC rated a representative
sample of its portfolio using the AIMM system. By combining AIMM scores – whichmeasure impact – with financial return data, IFC will be better positioned to utilize an asset
allocation model, strengthening its capacity to pursue the portfolio approach.

Principle 3 – Establish the Manager’s contribution to the achievement of impact: The
Manager shall seek to establish and document a credible narrative on its contribution to theachievement of impact for each investment. Contributions can be made through one or morefinancial and/or non-financial channels.6 The narrative should be stated in clear terms andsupported, as much as possible, by evidence.
•

IFC assesses the expected development impact contribution of its investment operations using
the AIMM framework. IFC considers AIMM scores alongside expected financial
performance in its investment decisions. In addition to the project- and market-level effects
generated by IFC’s investments, IFC’s client engagement, financial mobilization, andadvisory services also contribute to the development impact of IFC’s interventions.

•

Additionally, all IFC investment operations must demonstrate additionality7 which refers to theunique contribution that IFC brings to a private investment project that is not typically offeredby sources of finance that pursue only commercial objectives. This additionality may take6

For example, this may include: improving the cost of capital, active shareholder engagement, specific financial
structuring, assisting with further resource mobilization, providing technical/market advice or capacity building to
the investee, and/or helping the investee to meet higher operational standards.
7
See: footnote 3.

financial and/or non-financial forms. Together with the assessment of potential impact throughthe AIMM system, this establishes IFC’s contribution to the achievement of impact.
•

Additionality is a threshold condition for IFC involvement in a project, it is not a policy or an
objective, but rather a requirement embedded in Article III of IFC’s Articles of Agreement,
which states that “the Corporation shall not undertake any financing for which in its opinion
sufficient private capital could be obtained on reasonable terms.”8 9

Principle 4 – Assess the expected impact of each investment, based on a systematic approach:For each investment the Manager shall assess, in advance and, where possible, quantify theconcrete, positive impact10 potential deriving from the investment. The assessment should use
a suitable results measurement framework that aims to answer these fundamental questions: (1)What is the intended impact? (2) Who experiences the intended impact? (3) How significant is
the intended impact?11 The Manager shall also seek to assess the likelihood of achieving theinvestment’s expected impact. In assessing the likelihood, the Manager shall identify thesignificant risk factors that could result in the impact varying from ex-ante expectations. In
assessing the impact potential, the Manager shall seek evidence to assess the relative size of thechallenge addressed within the targeted geographical context. The Manager shall also consider
opportunities to increase the impact of the investment. Where possible and relevant for theManager’s strategic intent, the Manager may also consider indirect and systemic impacts.
Indicators shall, to the extent possible, be aligned with industry standards12 and follow bestpractice.13•

The AIMM system is IFC’s project impact assessment tool which allows IFC to estimate theexpected development impact of its interventions at their initial stage, when they are still
being developed.14 This approach gives IFC the capacity to set ambitious yet achievabletargets, identify projects with the greatest potential for development impact and financial
sustainability, and optimize project design15. Each new IFC investment is assigned an ex-ante
AIMM score that reflects the project’s potential for delivering development outcomes. The
assessment requires IFC investment teams, with support from dedicated sector economists, toarticulate the extent of the development challenge to be addressed, the associated intended

8

See: https://www.ifc.org/ArticlesOfAgreement
See: footnote 3.
10
Impact is considered the material effect/s on people and the environment resulting from the investment, as
outlined in Principle 1. Impacts assessed under Principle 4 may also include positive ESG effects derived from theinvestment.
11
Adapted from the Impact Management Project (www.impactmanagementproject.com).
12
Industry indicator standards include HIPSO (https://indicators.ifipartnership.org/about/); IRIS
(https://iris.thegiin.org/); GIIRS (https://b-analytics.net/giirs-funds ); GRI(www.globalreporting.org/Pages/default.aspx); and SASB (www.sasb.org), among others.
13International best practice indicators include SMART (Specific, Measurable, Attainable, Relevant, and Timely),
and SPICED (Subjective, Participatory, Interpreted & communicable, Cross-checked, Empowering, and Diverse &disaggregated), among others.
14
See: https://www.ifc.org/AIMM
15
See: footnote 3.
92

impact of the proposed investment, the parties that are affected by such impact, and theintensity of the effects that flow from the intervention.
•

The AIMM system assesses impact along two dimensions: project- and market-level effects;
and assigns to each an estimate of the likelihood of achieving impact.

•

The AIMM impact assessments also take into consideration country and market context. IFC
situates all development impact claims against defined development gaps or stage of market
development (i.e., the relative size of the development challenge that IFC is seeking toaddress with its intervention). The overall potential impact assessment is anchored by thiscontext determination.

•

The AIMM system also connects IFC’s ex-ante assessments with a results measurement
system that tracks actual impact during implementation. By using project and market
indicators identified ex-ante, IFC measures progress against the achievement of project- andmarket-level claims.

Principle 5 – Assess, address, monitor, and manage potential negative impacts of each
investment: For each investment the Manager shall seek, as part of a systematic anddocumented process, to identify and avoid, and if avoidance is not possible, mitigate andmanage Environmental, Social and Governance (ESG)16 risks. Where appropriate, the Manager
shall engage with the investee to seek its commitment to take action to address potential gaps
in current investee systems, processes, and standards, using an approach aligned with goodinternational industry practice.17 As part of portfolio management, the Manager shall monitor
investees’ ESG risk and performance, and where appropriate, engage with the investee toaddress gaps and unexpected events.
•

IFC’s Sustainability Framework18 articulates IFC’s approach to environmentally and sociallysustainable development and is an important component in the effort to achieve positive
development outcomes in IFC investment activities.

•

The framework includes a Sustainability Policy that specifies the role and responsibilities
assumed by IFC and eight Performance Standards (“PS”)19 that define IFC’s clients’
responsibilities for managing the environmental and social (E&S) risks of their operations.

16

The application of good ESG management will potentially have positive impacts that may or may not be theprincipal targeted impacts of the Manager. Positive impacts resulting from ESG matters shall be measured andmanaged alongside with, or directly embedded in, the impact management system referenced in The Impact
Principles 4 and 6.
17
Examples of good international industry practice include: IFC’s Performance Standards(https://www.ifc.org/performancestandards); IFC’s Corporate Governance Methodology(http://www.ifc.org/cgmethodology) , the United Nations Guiding Principles for Business and Human Rights(https://www.unglobalcompact.org/library/2); and the OECD Guidelines for Multinational Enterprises(http://mneguidelines.oecd.org/themes/human-rights.htm).
18
See: http://www.ifc.org/sustainabilityframework
19
See: www.ifc.org/performancestandards3•

It also includes the Access to Information Policy (“AIP”) describing IFC’s commitment totransparency and disclosure. In support of these policies, IFC’s environmental and social risk
management system includes guidance and procedures.

•

IFC undertakes E&S due diligence on all its investments, assessing the client’s ability andcommitment to achieve E&S outcomes consistent with the PSs over a reasonable period.

•

IFC uses a categorization system (e.g., A, B, C: F1, F2, F3) to reflect the potential magnitudeof E&S risks of its investments and to allocate resources and approval levels according torisk. E&S project due diligence is subject to multiple elements of quality control.

•

For financial institution (FI) investments, due diligence requires the review of the existing
portfolio and prospective business activities of its FI clients to identify those that could entail
serious E&S risks and defines requirements for managing them. IFC reviews theimplementation capacity of FI clients as well as their E&S management system.20•

Created in 1999, the Office of the Compliance Advisor Ombudsman (CAO) is theindependent recourse and accountability mechanism of the International Finance Corporation(IFC) and Multilateral Investment Guarantee Agency (MIGA) for social and environmental
concerns. The mandate of the CAO is to address complaints by people affected by
IFC/MIGA supported projects in a manner that is fair, objective, and constructive, and toenhance the social and environmental outcomes of projects in which those institutions play arole.21

Principle 6 – Monitor the progress of each investment in achieving impact against
expectations and respond appropriately: The Manager shall use the results framework(referenced in Principle 4) to monitor progress toward the achievement of positive impacts incomparison to the expected impact for each investment. Progress shall be monitored using apredefined process for sharing performance data with the investee. To the best extent possible,
this shall outline how often data will be collected; the method for data collection; data sources;
responsibilities for data collection; and how, and to whom, data will be reported. Whenmonitoring indicates that the investment is no longer expected to achieve its intended impacts,
the Manager shall seek to pursue appropriate action.22 The Manager shall also seek to use theresults framework to capture investment outcomes.23

20

See: footnote 3.
See:
https://www.ifc.org/wps/wcm/connect/corp_ext_content/ifc_external_corporate_site/about+ifc_new/accountability/tor-cao-vp
22
Actions could include active engagement with the investee; early divestment; adjusting indicators/expectations
due to significant, unforeseen, and changing circumstances; or other appropriate measures to improve the portfolio’s
expected impact performance.
23
Outcomes are the short-term and medium-term effects of an investment’s outputs, while the outputs are the
21

4

•

IFC’s results measurement system comprises four building blocks: diagnostics to inform
investment decisions, a rating tool – the AIMM system – to assess impact claims prior to
project approval, a monitoring system to measure progress against claimed effects, and anevaluation mechanism to promote learning and accountability. While IFC has employed arange of tools to measure impact through the years, development impact has always been at
the center of its business.

•

IFC uses monitoring indicators that are aligned with indicator usage practices andperformance metrics catalogued in the Harmonized Indicators for Private Sector Operations(HIPSO) and the Joint Impact Indicators (JII). IFC uses these indicators to measure thedevelopment results of its investment services.

•As part of its investment service agreements with clients, IFC outlines data collection,
methodologies, and responsibilities prior to the beginning of supervision activities andrequires that its clients report on key monitoring indicators each year. This helps IFC reporton its own performance in ways that reinforce public trust and expand IFC’s “license tooperate”.

•

Changes in project ratings inform investment managers of progress in deliveringdevelopment outcomes. Portfolio officers and managers, through periodic client visits, assess
progress against development outcomes and work with clients to take remedial action incases where development outcomes are at risk.

Principle 7 – Conduct exits considering the effect on sustained impact: When conducting an
exit,24 the Manager shall, in good faith and consistent with its fiduciary concerns, consider theeffect which the timing, structure, and process of its exit will have on the sustainability of the
impact.
•

IFC considers the effect on maintaining development impact when making exit decisions in
its equity portfolio. This can affect the timing, structure, and choice of who to sell to. Most
debt and guarantee investments are self-liquidating without exit decisions.25•

IFC documents equity exits decisions through sales memoranda, which provide rationales forexits.26

products, capital goods, and services resulting from the investment. Adopted from OECD-DAC(www.oecd.org/dac/).
24
This may include debt, equity, or bond sales, and excludes self-liquidating or maturing instruments.
25
See: footnote 3.
26
See: footnote 3.

5

Principle 8 – Review, document, and improve decisions and processes based on theachievement of impact and lessons learned: The Manager shall review and document the
impact performance of each investment, compare the expected and actual impact, and otherpositive and negative impacts, and use these findings to improve operational and strategic
investment decisions, as well as management processes.
•

The WBG entities, including IFC and the Independent Evaluation Group (IEG)27 havedeveloped an evaluation framework which stipulates the role of independent and selfevaluations to inform operational strategy and policy.

•

IFC conducts mandatory self-evaluations on a representative sample of investment andadvisory operations once they have reached operational maturity (or closure in the case ofadvisory operations). These self-evaluations are done typically five years following approval
and are validated by IEG. The aggregate results are reported to the Board annually anddisclosed publicly.

•

IEG undertakes fully independent evaluations of WBG operations28, policies, and strategies,
and reports directly to the Board of Executive Directors. These IEG evaluations may bearound broad development themes, strategies, specific sectors, or specific mandates that the
WBG entities are charged with delivering. The evaluations include recommendations, forwhich Management develops and commits to an action plan, which is monitored on anannual basis.

•

In addition, IFC also conducts demand-driven evaluations to fill knowledge gaps related toassessment of project performance, provide strategic insights to management and/or to meetdemands of external stakeholders for performance evaluation. IFC is updating its evaluation
strategy in line with the WBG Principles on Evaluation Principles on Evaluation and plans to
introduce more formality and rigor in the process of selecting evaluation topics and the
conduct and review of these evaluations. Demand-driven evaluations are conductedaccording to principles designed to ensure independence, particularly when they are
conducted primarily for external stakeholders such as with donors who have provided funds
for advisory programs or blended finance.

27
28

See: http://ieg.worldbankgroup.org
See: footnote 3.

6

Principle 9 – Publicly disclose alignment with the Impact Principles and provide regular
independent verification29 of the alignment: The Manager shall publicly disclose, on an annual
basis, the alignment of its impact management systems with the Impact Principles and, atregular intervals, arrange for independent verification of this alignment. The conclusions of
this verification report shall also be publicly disclosed. These disclosures are subject tofiduciary and regulatory concerns.
•

This Disclosure Note re-affirms the alignment of IFC’s procedures with the Impact Principles
and will be updated annually.

•

The independent assurance report on the alignment of IFC with the Operating Principles for
Impact Management will be made available in the third quarter of 2021 athttps://www.ifc.org/DevelopmentImpact/OPIM. The verification will be replicated every
year.

•

In addition, as part of its annual reporting practices, IFC seeks both an independent
assessment of the effectiveness of its impact measurement approach and an independent
verification of the resulting impacts achieved. The conclusions of the auditor are disclosed in
IFC’s Annual Report (see: https://www.ifc.org/AnnualReport).

•

Information on the current independent verifier is as follows:
Name and Address:

EY & AssociésTour First 1 place des Saisons TSA 14444 92037 Paris La
Défense Cedex France

Qualifications:“EY is a global leader in assurance, tax, transaction andadvisory services. The insights and quality services we deliver
help build trust and confidence in the capital markets and ineconomies the world over. We develop outstanding leaders whoteam to deliver on our promises to all of our stakeholders. In sodoing, we play a critical role in building a better working world
for our people, for our clients and for our communities. EY
refers to the global organization, and may refer to one or more,of the member firms of Ernst & Young Global Limited, each ofwhich is a separate legal entity. Ernst & Young Global Limited,a UK company limited by guarantee, does not provide services
to clients. Information about how EY collects and uses personal
data and a description of the rights individuals have under dataprotection legislation are available via ey.com/privacy. For more
information about our organization, please visit ey.com.”

29

The independent verification may be conducted in different ways, i.e., as part of a financial audit, by anindependent internal impact assessment committee, or through a portfolio/fund performance evaluation. The
frequency and complexity of the verification process should consider its cost, relative to the size of the fund or
institution concerned, and appropriate confidentiality.

7

Most Recent Review:

February 25, 2021

Next Planned Review:

October 30, 20218