LeapFrog releases impact audit results, achieving top rating
Industry leader verified as best-in-class across all nine operating principles for impact management
September 19, 2019: LeapFrog Investments today became the first impact investor globally to announce the results of an independent audit of its impact against the Operating Principles for Impact Management, new industry standards developed by the International Finance Corporation in consultation with leading impact investors and other stakeholders.
Launched in April, the principles provide common disciplines for management of investments for impact, helping to ensure authenticity and high standards of measurement. In the independent audit by Tideline, a leading US impact advisory consultancy, LeapFrog was assessed as an “exemplification of industry best practice”, with its impact measurement and management (IMM) system achieving “an advanced level of alignment across the board for all nine of the principles”. Tideline concluded that “LeapFrog’s IMM comprehensively addresses and exceeds the implementation guidance provided by the IFC and has been refined and strengthened over the course of several funds”.
“The impact investing industry needs authenticity and accountability now more than ever. So we have again taken the first leap, publicly, hoping others swiftly will join us,” said Dr Andrew Kuper, founder and CEO of LeapFrog Investments. “Since our founding in 2007, LeapFrog has worked hard to be a field-defining leader in impact measurement and management. It hasn’t always been easy, requiring inventiveness and discipline in our investment process from beginning to end. We are pleased to have those efforts independently validated today. Ultimately, it has allowed us to demonstrate that businesses can achieve strong profits thanks to social impact, in turn rendering that impact more scalable and sustainable.”
Today, LeapFrog’s 26 companies reach 188 million people with healthcare or financial services, across 35 countries. Of those individuals, 155 million are emerging consumers in Africa and Asia, living on less than $US10 per day per person in the household. At the same time, LeapFrog’s Profit with Purpose investment strategy has seen its companies grow on average by 35 per cent per year since investment, enabling a host of profitable exits to strategic buyers. Global investors have committed more than $US1.5 billion to the firm.
Tideline, the consulting firm that conducted the audit, was selected based on its market-leading experience in developing impact measurement and management systems for prominent investors. “We reviewed thousands of pages of investment policies, tools, memoranda, data inputs and impact performance reporting. LeapFrog sets a high bar,” said Tideline managing partner Ben Thornley. Tideline assessed both the extent of alignment with the IFC’s guidance for the principles and the degree to which the group components of the system are implemented authentically in practice. LeapFrog was assessed as having an “advanced” practice of impact management for each of the nine principles, which is Tideline’s top rating.
LeapFrog played a key consultative role on the development of the operating principles, which are now endorsed by many of the world’s largest and leading asset managers.
“LeapFrog’s passion for mobilising capital in order to both unlock value and drive better social outcomes through impact investing is something we deeply share,“ said Gary Brader, group chief investment officer of global insurer QBE, a repeat LeapFrog investor. “LeapFrog’s leadership in both contributing to the development of the principles and being the first to announce an audit against them demonstrates the group’s continued dedication to accountability, authenticity and field leadership.”
LeapFrog shared with the IFC and the industry a decade of measurement experience based on the development of FIIRM, LeapFrog’s proprietary measurement framework which encompasses financial, impact, innovation and risk-management factors. Across the private equity investment cycle, FIIRM incorporates key performance indicators, both financial and operational, as well as governance indices, which are benchmarked to global best practice. The results of the audit highlight the firm’s strength in integrating impact considerations consistently throughout the investment process including clear protocols and standardized reporting.
LeapFrog is actively leveraging Tideline’s insights to strengthen further the Profit with Purpose strategy. Asked where LeapFrog could improve, Tideline identified the further institutionalization of the firm’s Responsible Exits Framework, itself an innovation that advanced the industry. This framework leads to consideration of customers and employees as well as shareholders prior to a company being sold.
LeapFrog will be publishing a formal public disclosure statement and share its learnings from the audit process with the wider industry. The firm will use also its role as an Operating Principles for Impact Management Advisory Board member to work with the secretariat on implementation and evolution of the principles.
LeapFrog’s third fund recently surged past its $US600 million target to reach a final close of $US743 million. Investors in the new fund included leading insurers such as Prudential Financial, AXA XL, QBE, and Zurich; pensions and asset managers such as TIAA-Nuveen and Partners Group Impact; development finance institutions such as DEG, EIB, IFC, Proparco and OPIC; and family offices and foundations including the Ford Foundation and Rockefeller Foundation.
LeapFrog has also publicly announced its aim to deliver essential services to 1 billion people by 2030. “With so many people lamenting the failures of narrow forms of capitalism, the evidence is here for a better norm: Profit with Purpose,” concluded Dr Kuper. “It’s time to trust investors who say they are contributing to such a brighter future – but also to verify.”
About LeapFrog Investments
LeapFrog invests in extraordinary businesses in Africa and Asia, partnering with their leaders to achieve leaps of growth, profitability and impact. Founded in 2007, LeapFrog’s companies now reach 188 million people across 35 countries with healthcare or financial services. 155 million of those individuals are emerging consumers, and most are accessing quality insurance, savings, pensions, credit or healthcare for the first time. LeapFrog companies have grown on average by 35 per cent per year since investment. They now provide jobs and livelihoods to more than 128,000 people. By 2017, LeapFrog was ranked by Fortune as one of the top five companies to change the world, alongside Apple and Novartis, becoming the first private investment firm ever listed.