In The News

Funds Linking Management Compensation to Impact Performance, Finds Research

28 Apr 2021

Suz Mac Cormac spoke to Responsible Investor about the “Legal Innovation in Impact Investing” study, which found that impact fund managers are increasingly starting to tie management compensation to the achievement of impact goals.

According to Suz, while fewer than 15% of funds surveyed tie management compensation such as carried interest to impact goals, the survey shows it is becoming more common as it was “very rare” just five years ago. She said mechanisms in addition carry included linking bonus compensation to impact metrics such as carbon emission reduction value.

“Performance-linked securities are also more common when these funds invest in impact – particularly with debt but also with equity,” Suz added. This could include, for example, lower interest rates when climate mitigation or reduced emission goals have been met.

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