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This way out

Impact investors are divided over what constitutes a responsible exit. Jack Aldane asks what lessons can be learned for those seeking to ensure a positive legacy
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Rarely are the risks stacked quite so high as when an impact investor prepares to withdraw its investment. Get it right and not only does the exit secure a profit but it also makes sure that the project retains its developmental impact for the long term.

This is what is referred to in the industry as a ‘responsible exit’ because without a considered withdrawal by the investor in terms of the buyer and continuing development goals, impact investment makes little sense to begin with.

The Global Impact Investing Network (GIIN)’s recent report, Lasting Impact: The Need for Responsible Exits, makes the case for a more in-depth look at what these exits require. It argues that everything from the type of asset sold at exit, to when and why an exit takes place, can affect the long-term impact of a project. Central to the report is what GIIN terms ‘mission drift’, or the risk of a project straying from its original goals.

An exit may be considered complete once shares in a company are sold, or once real assets such as land are sold instead of shares. Hannah Schiff, research manager at GIIN and co-author of the report, says investors often prioritise exits once committed to a project, partly because they want to entrust their impact to a potential buyer, but also because they know exits are challenging and can have a dramatic affect on returns.

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