Crafting a Winning Impact Thesis: A Guide for Impact Investment Fund Managers

Cinzia Scanu

Fundraising for an investment fund is a challenge. For those steering impact investment funds, the task becomes even more intricate.

You’ve probably dealt with:

Dual Goals: Striving for financial returns while also ensuring tangible societal impact.
Skepticism: Navigating the maze of potential investors, some of whom may be cautious or unfamiliar with the concept of impact investing.
Clarity: Articulating a clear strategy that satisfies the diverse expectations of both financial and impact-oriented stakeholders.

Crafting an impactful investment strategy that resonates is no easy task.

However, at the core of this challenge is the potential of a compelling impact thesis.

In this article, we’ll delve into:

What is the Impact Thesis and why it matters
Crafting Your Impact Thesis: 5 Essential Questions
3 Pillars for a Successful Impact Thesis

What Is the Impact Thesis of an Impact Investment Fund?

The impact thesis, much like the investment thesis of a traditional fund, guides the investments.

It outlines the fund’s scope, its impact goals, and how the investment strategy will achieve them.

It is common to create a general mission statement such as “help purpose-driven entrepreneurs to thrive” and then move on.

As a Fund Manager, you should spend more time on your impact thesis to clearly communicate your intended impact and goals.

Here is why:

Benefits of Building a Strong Impact Thesis

1. Stand Out Among Competitors

The Global Impact Investing Network (GIIN) estimated the total market size at $1.164 trillion in 2022.

In such a growing sector, differentiation is crucial.

A clear explanation of how your fund will “do well by doing good” can help you stand out and attract even the most discerning investors.

2. Anchor Your Strategy

An impact thesis anchors your fund to its core values.

Establishing clear boundaries will ensure that tempting financial opportunities don’t detract from your impact goals or damage your reputation.

3. Streamline Impact Management

With a clear direction, it becomes simpler to define, collect, and report just the data that matters. Your future self, team, and investees will thank you for that.

So, let’s dive into how you can craft your impact thesis through the following steps.

Crafting Your Impact Thesis: 5 Essential Questions

The Impact Thesis outlines:

The societal or environmental objectives you aim to achieve
The approach to realize this intended impact.

To sculpt a solid thesis, ponder these questions:

1. What Problem Are You Addressing?

Start with your experiences and values.

Think about the ideal world you envision for future generations: What’s the disparity between today’s reality and that vision?

2. Who Is the Target Population?

Who is directly and indirectly affected by the problem?

It can be defined by geographic region, income level, degree of exclusion, or other demographic specificities.

3. What Are Your Impact Goals?

Starting from the problem, define measurable goals.

The UN SDGs and IRIS+ of GIIN are great resources for exploring global issues, identifying themes, and defining your goals.

Focus on what matters most, don’t get caught up in an endless list of goals.

4. What’s the Investee Profile?

Identify businesses that align with both your impact objectives and anticipated financial returns, taking into account factors like sector, business model, and growth stage.

5. What Is the Investor’s Contribution?

Considering the financial, human, and social resources available, define how the fund’s financial and non-financial support will help investees maximize their impact.

3 Pillars for a Successful Impact Thesis

1. Think Long-Term

An impact investment fund is a long-term commitment.

Choose a cause that you genuinely believe in.

While market trends sway, your dedication to a cause will remain firm.

Make projections of what will change (or not) in the next few years and how the fund will lead to a better future.

2. Make It Unforgettable

Your thesis should be straightforward and memorable.

It’s not about capturing everything but ensuring what’s captured sticks.

Select the most relevant information and create a thesis that is specific enough to set the scope and broad enough to encompass opportunities that align with your purpose.