Baking in the Impact: Using Binding Impact Covenants

Impact covenants are targets set by the lender and borrower to safeguard an enterprise’s impact and encourage achievement of impact outcomes. These covenants are embedded in loan agreements, with interest rate incentives for compliance. Covenants can include targets like a compensation ratio cap or living wage payment requirement, and are tied to a loan interest rate decrease or increase, depending on if they meet or miss the target. Boston Impact Initiative is a place-based impact investor that deploys integrated capital (equity, debt, and grants) into regenerative local businesses that restore the productive capacity of communities of color. We consider our impact outcomes to be as important as our financial outcomes, and so we’ve included impact covenants in dozens of impact investments since 2016. Come learn from us in this engaging panel, as we walk through a case study to showcase the mechanics of including binding impact covenants in your impact investments.