Impact measurement in impact investing

Refilwe Mokoena

June 2015

While still relatively nascent as an investment practice, impact investing has been gaining prominence globally, as evidenced by the growing number of investors referring to themselves as impact investors and more formally seeking opportunities and pipeline for investment into social enterprises.

Measuring the social and environmental performance of impact investees is integral to the impact investment industry, and will continue to grow in importance as evidence begins to show comparable financial performance between impact and “mainstream” investments.  The recent “Impact Investing Benchmark” by Cambridge Associates and the Global Impact Investing Network (GIIN) found that venture capital and private equity funds with impact objectives produced similar financial returns to those with solely financial goals[1].  Should this trend continue, tracking and improving impact performance, will become as equally central to investors as achieving market returns, and will therefore require accurate and practical impact measurement practice.  Achieving this balance is still a challenge for the industry.

In spite of key efforts to standardise impact measurement indicators, differences between sectors and geographies will make the use of contextualised metrics necessary.  Currently, impact investors are only marginally more likely to use Impact Reporting and Investment Standards (IRIS) to measure impact as they are to use contextual indicators[2].  Similarly less than half of investors report using standard rating and reporting systems such as the Global Impact Investment Rating System (GIIRS) and Global Reporting Initiative (GRI) to ensure their impact performance.[3]  At this stage it makes more sense to develop and professionalise impact measurement practice – the way in which measurement is done – than to expect full agreement on a standard set of indicators.

Therefore consolidating industry initiatives aimed at addressing key impact measurement challenges including whether and how to account for attribution; how to keep measurement practice cost-effective and make its results meaningful, will be key.  As the industry matures and impact performance measurement is more strongly enforced, it may be tempting to create a complex industry infrastructure to ensure social and environmental performance are measured and reported on as rigorously as financial performance, and that impact and financial results equally influence investment decisions.  It will be key that the industry focus on building upon and improving already-existing standards, practices and frameworks, rather than creating entirely new initiatives.  According to the World Business Council for Sustainable Development, there are over 150 social impact measurement frameworks and tools available to the development finance industry, including those specifically designed to assess impact investments[4].  If the move to more accurate and operational impact measurement will succeed, it will require clarity on general good practice, and a willingness to learn from and build on experience – and mistakes – in assessing and using impact performance.


[1] Mudliar, Abhilash ; Sternlicht, David.  Introducing the Impact Investing Benchmark.  Cambridge Associates, LLC.  Global Impact Investing Network.  June 2015.

[2] 60% of respondents to the 2015 Impact Investor Survey use impact metrics aligned to IRIS, while 58% use other indicators (and others use both). Bouri, Amit ;  El Idrissi, Ali ; Mudliar, Abhilash ; Saltuk, Yasemin ; Schiff, Hannah. Eyes on the Horizon; the Impact Investor Survey.  JP Morgan.  Global Impact Investing Network.  May 2015.

[3] Ibid

[4] Towards a Social Capital Protocol : A Call for Collaboration.  World Business Council for Sustainable Development.  April 2015.

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