CLOSED- Public Consultation - Fund Requirements for Certification to GS4GG Header Image

PUBLIC CONSULATION



Fund Requirements for Certification to

Gold Standard for the Global Goals

1st March 2022


Many thanks for taking the time to provide your thoughts and feedback on these new Fund Requirements for Certification to Gold Standard for the Global Goals.


The aim of these requirements is to provide impact investors (e.g., philanthropic foundations, corporates, development agencies, governments, or pension funds etc) with a clear, best practice process to credibly manage, measure, and maximise impact toward the Sustainable Development Goals (SDGs).


We are seeking your input on these Requirements to ensure their integrity, quality, and practicality until 31 March 2022.

The form sets out the draft Requirements in eight sections and invites comments in response to specific questions.  

NOTE:

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For any further information please contact fundreq@goldstandard.org. 

 

Thank you again! 

 

The Gold Standard Team

Name*

SECTION 1 – FUND DESIGN & ESTABLISHMENT

  • 1. Fund Design & Establishment - This section addresses the importance of establishing and documenting goals as well as outlining the process of monitoring and adjusting as needed to maximize the ability to reach those established goals in an integrated way before the Fund begins operations. The Fund shall develop a written document that defines & addresses Impact Goals toward the Sustainable Development Goals (SDGs), the due diligence processes and the ongoing process of monitoring of progress and reactions to identified opportunities for improvement as well as integrating planning for eventual exit strategies. Those documents shall include at least the following:

    • 1.1.  As per GS4GG Principles and Requirements the Fund shall define a clear, direct contribution to sustainable development, defined as making demonstrable, positive impacts on at least three Sustainable Development Goals (SDGs), one of which shall be SDG 13 (defined herein as Emissions Reductions or Removals and/or Adaptation to climate change) as an integral part of its portfolio level impact. This shall be stated as an Impact Strategy.

    • 1.2.  The Fund shall generate a written Impact Strategy and Design that addresses how they will meet the established Impact Goals , how they will monitor progress, and how they will adjust based on interim results. This information shall be fully integrated into the Fund Investment Strategy. The components shall include at a minimum:

    • 1.3.  An overt statement that the goal of the Fund is to focus on contributions to the achievement of meaningful positive SDG impacts while addressing any negative impacts that may emerge

    • 1.4.  A review and classification of the objectives of the Fund that includes an assessment of all impacts (not only those targeted) and subsequent classification of activities that follows the Impact Management Project ABC Classification (Avoid Harm, Benefit Stakeholders, Contribute to Solutions)

    • 1.5.  The due diligence process is meant to identify baselines, determine where improvements may be made, and outline a process to ensure that those improvement strategies are followed during the Implementation phase of the Fund’s life.
      • 1.5.1. Identify the process to screen potential investees to maximize the likelihood of delivering the defined Impact Goals and provide the details on the internal mechanisms in place to ensure the processes detailed in the due diligence and impact assessment processes will be met.
      • 1.5.2. It is recognized that not every investment may be fully compliant with all the GS4GG Safeguards. If this is the case the Fund shall:
        • 1.5.2.1. Identify any non-compliances and
        • 1.5.2.2. Publish a timebound plan for closing the gaps, with milestones to be met as interim goals, and
        • 1.5.2.3. Determine in advance what actions shall be taken if the gaps are not closed within the timeframes developed.

    • 1.6. Impacts through Fund investment shall be assessed across the full set of SDGs. Note that negative impacts shall be assessed using GS4GG Safeguarding requirements.
      • 1.6.1. Every SDG shall be considered in the due diligence process and assessed to determine what, if any, impacts may accrue from the activities of the investee and to avoid unintended negative consequences.
      • 1.6.2. The 3 targeted Impact Goals shall be described in the C classification - Contribute to Solutions. Other impacts shall be classified as A or B - Avoid Harm or Benefit Stakeholders.
      • 1.6.3. This discussion shall provide detail that is commensurate with the size of the investment planned.

    • 1.7. The Fund shall assess potential investees for good governance processes that include transparency, inclusiveness, gender sensitivity, as well as those that are further outlined in the GS4GG Safeguarding Requirements.

    • 1.8. The Fund shall discuss the safeguarding approach as well as how ex-ante assessments of anticipated impacts will be conducted while discussing risk and mitigation strategies to avoid missing impact targets or overstating planned impacts.
      • 1.8.1. Note that for potential investees who may not be following best practices, creating the opportunity for improvement via the ensuring the provision of support to facilitate their progress toward best practices is an integral part of the approach toward intended impact. (See 1.5)

    • 1.9. The Fund shall detail the its organizational governance to ensure SDG Impact Goals are being supported robustly throughout the organization

    • 1.10. The Fund shall detail the exit strategies for investments, with particular attention to ongoing contribution to Sustainable Development post exit. The exit plans shall include transition strategies (including time to exit) and provide a discussion of how a “Do No Harm” approach will be applied.
      • 1.10.1. Note that the Do No Harm strategy shall be applied and assessed across all SDGs, not only those that are intended impacts of the Fund.
      • 1.10.2. Note that exit strategies may include continued engagement via a new fund with the caveat that ongoing impact assessment shall be included, even if the new investment vehicle is not an “Impact Fund”.

    • 1.11. There shall be a detailed description of the impact assessment process that will occur throughout the life of the fund.
      • 1.11.1. Impact assessment shall be ongoing and regular during the full life of the Fund. It must begin once more than 10% of planned assets for a tranche or full fund (lesser of the two) are invested.
      • 1.11.2. This assessment shall monitor any difference (+/-) between the ex-ante estimates and the actual results in the same way that ongoing financial performance is monitored regularly.

    • 1.12.  Roles and responsibilities of the funds staffing shall be included with disclosure of any performance incentives offered that are linked to meeting the Impact Goals of the Fund.

Questions

SECTION 2 – INVESTMENTS

  • 2. Investments - This section focuses on the processes the Fund Manager shall follow in determining what investments they will make, how to ensure the GS4GG safeguards are met and how they will complete and document ongoing monitoring of the performance against the established Impact Goals of the fund.

    • 2.1. Safeguarding 
      • 2.1.1. The full set of GS4GG Safeguarding requirements and the stakeholder consultation and as appropriate the detailed methodologies noted for calculation of specified measurements shall be followed.

      • 2.1.2. In addition to GS4GG safeguarding requirements,safeguarding shall be put in place for ensuring the full Rights of Children -
        • 2.1.2.1. Note this is more extensive than prohibiting Child Labor and shall include reference to "The Childrens Rights and Business Principals" developed by UNICEF, The Global Compact and Save the Children.

      • 2.1.3. Fund Managers shall ensure that their Investees and Investors are classified in stakeholder mapping as stakeholders for the Fund.

      • 2.1.4. Fund Managers shall require that investees follow GS4GG stakeholder consultation requirements and be prepared to present resources to support investees as needed in this process, including Technical Assistance.
        • 2.1.4.1. Fund Managers may need to support capacity building via subsidizing the capacity building efforts directly or embedding consideration of those costs into their anticipated returns (See Design Section).

      • 2.1.5.At a minimum, the Fund shall disclose to Investors and require of Investees disclosures that meet the Sustainable Finance Disclosure Regulations (SFDR) requirements. (Note, even if not legislated)

    • 2.2. Investee Screening
      • 2.2.1.Document the screening steps identified in the Design document for each potential investment.
        • 2.2.1.1. Retain records of all investments made and those that were considered and rejected.

      • 2.2.2. Document the process to ensure that the Technical Assistance is provided to investees in line with the needs your screening determines.
        • 2.2.2.1. Specifically, the ability of investees to deliver the necessary data to support impact assessment and the standard requirements shall be noted.
        • 2.2.2.2. If Technical Assistance is needed, detail how capacity building and Technical Assistance will be provided to support improved ability to meet goals.

Questions

SECTION 3 – ELIGIBLE INVESTORS & INVESTMENTS

  •  3. Eligible Investors & Investments – This section discusses eligible activities, Investors and Investees in a Fund.

    • 3.1. There is no exclusion for eligible Investors in the Fund.

    • 3.2. Beyond the prohibited activities/investments noted in GS4GG, there are no limits, except as established by the Fund on Investees. Each Fund is free to add to the exclusion list in ways that support reaching the Impact Goals set, but there is no requirement to do so.

    • 3.3. The possible investments the Fund may make shall fall in the definitions of the GS4GG Principles and Requirements with particular attention to ineligible categories. See GS4GG Principles and Requirements Sections 4.1.3 - 4.1.7

      • 3.3.1. Emerging geo-engineering approaches are able to enhance emissions reductions, and there are some (e.g. mineral sequestration enhancement) that have SDG co-benefits.
        • 3.3.1.1. Solar Radiation Modification (SRM) projects are excluded.

      • 3.3.2. Consideration of geo-engineering approaches must robustly apply the precautionary principle. Where outcomes are uncertain or unknown, and may result in significant harm to SDGs, the investment shall be excluded.

      • 3.3.3.The Fund shall publish a list of geoengineering technologies they have invested in (technologies, not Investees).

Questions

SECTION 4 – IMPLEMENTATION

  • 4.  Implementation - This section discusses the requirements for regular and ongoing monitoring of investments against the stated Impact Goals, the need for documentation of the processes of monitoring, the relationship that a fund may have regarding issuance of carbon or other "credits" that may monetize impact. It stresses the need for an ongoing assessment of the impacts of the Fund that shall be completed on at least the same level as ongoing assessment of financial performance.

    • 4.1. Ongoing measurement of outputs, assessment of progress toward impact and demonstration of compliance with activities identified in Establishment of Fund and documentation and Due Diligence of Investees shall be conducted.

    • 4.2. Impact assessment and adjustment shall follow appropriate and pre-determined (Impact Strategy, Fund Design) pathways to regularly and consistently quantify and assess impacts.
      • 4.2.1. Internal assessments shall be done at least at the frequency delineated in the Fund Design stage, and no less frequently than annually.
      • 4.2.2. Document how feedback has been incorporated from each investment into future due diligence and Investee screening efforts of the Fund.

    • 4.3. If the Fund Manager wishes to require (and potentially subsidize) GS4GG project certification of Investees with a goal of issuing credits, the due diligence process shall ensure that any issues of Free Prior and Informed Consent (FPIC)and revenue sharing with affected stakeholders of the Investee are addressed in advance. Investees will be expected to document and disclose those processes and results if they pursue certification of outputs.
      • 4.3.1. Note that the Fund Manager is prohibited from acting as the issuer (Project Manager) of any monetized credits.
      • 4.3.2. Any pursuit of GS4GG Project Certification by an investee shall be independent of the processes for Fund Certification.

    • 4.4. The Fund shall document how and if they make changes to either their investment or any other aspect of the allocations, Fund strategy etc. based on regular assessment of progress to meet the identified Impact Goals.

Questions

SECTION 5 – IMPACT CALCULATIONS

  • 5. Impact Calculations – This section captures the processes that the Fund shall follow to ensure consistent assessment of impact and eventual development of impact statements.

    • 5.1. During the due diligence process for each investment a baseline assessment shall be generated against the established SDG Impact Goals the Fund has set.
      • 5.1.1.This must be incorporated into the decision-making process and completed before a decision to invest or not has been made. This process shall be documented.

    • 5.2. When possible, impact assessment shall follow Gold Standard eligible methodologies.

    • 5.3 .If there are new methodologies that the Fund Manager wishes to bring forward during the Design Review assessment, those shall be detailed in the Fund Strategy and presented for Gold Standard review and approval before they are incorporated into the operation of the Fund.
      • 5.3.1. If the proposed methodology is not currently approved under Gold Standard a full description of its applicability, impact quantification and ongoing monitoring shall be included. When applicable, the Fund Manager shall use methodologies that are already recognized by other ISEAL member standards as they have been reviewed for inclusivity and rigor in the development process.

    • 5.4. Baseline assessments shall also include a review of anticipated impact across all SDGs. For negative impacts (realized or anticipated) (see Section 4.1.19 - 4.1.23 of the GS4GG Principles and Requirements) mitigation strategies shall be presented..

    • 5.5. Impact reporting shall detail both positive and negative impacts of the investment/Investee.

    • 5.6. Any Impact Claims made by the Fund must follow Gold Standard Claims Guidelines (under development).

Questions

SECTION 6 – GOVERNANCE

  • 6. Governance - This section outlines governance requirements for the Fund, as well as how the pilot for Fund Certification under GS4GG will be governed.

    • 6.1. Fund Governance 
      • 6.1.1.The full enterprise (not just the specific Fund) shall follow safeguarding actions as per the GS4GG Safeguarding Principles and Requirements.

      • 6.1.2. The enterprise shall have a public statement about its intent in establishment and SDG Impact Goals.

      • 6.1.3. The Fund shall have active oversight from its governing bodies (depending on structure, the board and/ or the investment committee) of matters relating to:
        • 6.1.3.1. Organizational culture
        • 6.1.3.2. Policies on respect for human rights and other responsible business and impact management policies, including its grievance and reparation mechanisms for affected Stakeholders (including, for the avoidance of doubt, whistleblowing safeguards)
        • 6.1.3.3. Performance to and conformance (including progress on and process for continuous improvement) with its responsible business policies and practices
        • 6.1.3.4. Process of Stakeholder identification and involvement in decision making
        • 6.1.3.5. Stakeholder complaints and remedial actions taken (ensuring no instances of adverse findings without adequate remedies being in place)
        • 6.1.3.6. Relevant and material sustainable development issues, including risks and opportunities
        • 6.1.3.7. Purpose and approach to creating sustainable long-term value, impact strategy (including its impact risk appetite and tolerance), portfolio level impact goals and investment strategy and the compatibility of its impact strategy and portfolio level Impact Goals with its investment strategy (including its financial return targets and financial risk appetite and tolerance)
        • 6.1.3.8. Performance to and conformance with its impact management policies and practices and progress against its portfolio level Impact Goals and investment level impact targets and related relevant SDG and/or other sustainable development outcome thresholds, baselines and counterfactuals
        • 6.1.3.9. Ensuring adequate budget and resources to manage required Stakeholder involvement effectively and deliver its impact strategy and portfolio level Impact Goals effectively and in a timely manner
        • 6.1.3.10. Impact and sustainable development related disclosures and external reporting

      • 6.1.4. The Fund shall have governing bodies (depending on structure, the board and/or the investment committee) that:
        • 6.1.4.1.Have competencies concerning sustainable development issues and impact management
        • 6.1.4.2.Prioritize gender and other dimensions of diversity as demonstrated by composition and culture, including openness to hearing and including different voices and perspectives in decision making
        • 6.1.4.3.Hold the CEO/Managing Director accountable for the Fund positively contributing to sustainable development and the SDGs, including operating in accordance with its culture, responsible business and impact management policies and practices and delivering on its strategy, including its impact strategy and portfolio level impact goals
        • 6.1.4.4.Meet the national minimum corporate governance standards, as appropriate

    • The Fund Manager (and any parent and/or holding company – including its ultimate holding company) shall have policies, practices, and performance relating to corporate governance, and respect for human rights and other responsible business practices that are consistent with GS4GG Requirements.

    • 6.2. Governance of the Standard
      • 6.2.1.The Fund Manager shall follow the established rules of the GS4GG in compliance with ISEAL requirements and any other internal processes Gold Standard determines are appropriate.

      • 6.2.2.These Requirements for Fund Certification will be first tested as a pilot program and subject to the rules for piloting as stated by Gold Standard and in compliance with ISEAL guidance.

      • 6.2.3.Due to the nature of the questions being addressed in the impact investing community, part of the post pilot process will include a determination of the frequency of updating the Requirements for Fund Certification on a more frequent basis than GS4GG as a whole. This will allow uptake of best practices as most appropriate and ensure ongoing effectiveness and pertinence of Gold Standard for the Global Goals and its various applications.

Questions

SECTION 7 – IMPACT STATEMENTS/CLAIMS

  • 7. Impacts Statements/Claims - This section will be a separate document that provides the requirements for the presentation and use of Impact Statements that reference the Impact Goals of the Fund. It is presented here to gather input during this initial consultation phase. 



  • Requirements are anticipated that will mandate that any Impact Statement include metrics that allow a reader of to understand the relative size of the investment made by the fund in the context of enabling the Impact Goals to be reached (e.g. what % of the funding needed came from the FM, was the funding small but first loss tolerant).  It is important that the appropriate context is presented to avoid implied overstatement of the impact of the investment by either Fund or by a reader of the statement.  Inputs on how to best structure Impact Statements for investors, stakeholders and other interested parties are welcome.

Questions

SECTION 8 – FINAL QUESTIONS

Other questions for the consultation

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