Strengthening impact integrity in investment decision-making for sustainable development

Purpose: This paper aims to focus on impact integrity in investment decision-making – an under-researched yet important topic – as a means for optimising investor contributions to sustainable development outcomes, including achieving the sustainable development goals (SDGs). Design/methodology/approach: This conceptual paper adopts a two-step approach. First, this paper reviews existing “responsible” investment strategies and products used in practice and highlight their shortcomings in terms of optimising sustainable development outcomes. Second, drawing from the minimal standards theory, this study explores how emerging impact management practices may strengthen impact integrity in investment decision-making and mitigate shortcomings in existing “responsible” investment approaches to increase their contribution to sustainable development outcomes. Findings: Current “responsible” investment approaches often do not optimise sustainable development outcomes and may facilitate “impact washing”. The theoretically grounded framework demonstrates standardised impact management practices based on a bounded flexibility approach – adaptable to different contexts within limits and assessed by skilled analysts – along with incorporating shared language and conventions supported by appropriate accountability mechanisms that can be used to mitigate shortcomings in current “responsible” investment approaches. The authors further propose accountability mechanisms to systematically involve stakeholders (including rightsholders) in decisions that impact them with effective grievance and reparation mechanisms. Such an approach, the authors argue will strengthen impact integrity and the capacity of investments to optimise contributions to sustainable development outcomes. Practical implications: The findings have implications for the ability of investment markets to optimise their contributions to sustainable development and the SDGs. Social implications: By highlighting shortcomings in current “responsible” investment approaches and focussing on strengthening impact integrity in investment decision-making through standardised impact management practices, the findings enhance the capacity of investment markets to contribute positively to sustainable development and the SDGs. Originality/value: Despite its importance, impact integrity in investment decision-making is severely under-researched with little academic attention. This paper fills this void.