Impact-Based Incentive Structures: Aligning Fund Manager Compensation With Social and Environmental Performance
The issue brief draws upon examples from Aureos Capital’s Africa Health Fund, Core Innovation Capital, and UBS to outline five key considerations for designing financial incentives tied to social and/or environmental performance. Impact-based incentive structures – when designed and implemented appropriately – could be an effective tool in ensuring impact objectives, along with financial returns, are appropriately weighted in investment decisions. To encourage further consideration and research, this issue brief identifies early lessons in aligning compensation with social and environmental performance. The GIIN hopes that this issue brief contributes to a broader discussion regarding ways to increase the effectiveness of impact investments while enhancing the credibility of the impact investing field.