ABSTRACT
Investing for impact is an increasingly common practice but some of the mechanics of investing are still catching up. Critically, the incentive system for investment professionals, known as ‘carry’, rewards only financial returns, making an impact forever on the second child. By adopting impact-linked carry, fund managers can ensure they are incentivized equally for impact and commercial returns. It also acts as a powerful signal of intentionality to the market. This chapter introduces a simple model of impact-linked carry that allows for customization to suit the varied contexts of investment funds. This is followed by a case study outlining the model’s implementation by Indonesia Women Impact Fund (IWEF), a seed-stage gender-lens investment fund.
