How Do You Measure the Success of Impact Investing?

Navigating the Complex Landscape

With commentary from Drew Payne, CEO of UpMetrics

As the impact investing market continues to grow, rigorous measurement and reporting practices remain crucial for promoting accountability across organizations, generating actionable insights, and fueling positive change. While the vast landscape of measurement frameworks, standards, and tools remains largely disjointed, important strides have been made in the effort to consolidate disparate methodologies, create synergies, and foster clarity and comparability. How are investors utilizing resources as they stand today and what best practices are emerging?

What is IMM?

Impact measurement and management (IMM) refers to the process by which organizations - including asset managers and entrepreneurs - quantify and report on the social and environmental effects of invested capital. Processes include materiality assessments, constructing high-level goals and/or a theory of change, selecting appropriate metrics, and continuously monitoring results, risks, and returns to optimize results.

The impact investment space has grown significantly in recent years; according to the Global Impact Investing Network (GIIN), it has experienced 21% compound annual growth since 2019. Rigorous measurement practices are key to understanding the effectiveness of capital in achieving impact goals. Nonetheless, determining specific methodologies can be challenging given the overwhelming number of resources, standards, and norms that exist today.

The impact measurement landscape

Alphabet soup 

Currently, investors and asset managers are faced with a wide array of methodologies, principles, frameworks, and metrics developed across a broad range of organizations. Below is a non-exhaustive list of such groups and resources:

High-level principles and frameworks:

• Sustainable Development Goals (SDGs)

• IFC Operating Principles for Impact Management

• Principles for Responsible Investment (PRI)

• Impact Management Platform (IMP)

• Capitals Coalition

Metrics and reporting standards and systems:

• International Sustainability Standards Board (ISSB)

• IRIS+ (developed by the Global Impact Investing Network)

• Harmonized Indicators for Private Sector Operations (HIPSO)

• Joint Impact Indicators (JII)

• Global Reporting Initiative (GRI) Standards

• International Foundation for Valuing Impacts (IFVI)

• CDP

• International Organization for Standardization (ISO)

• Social Value International (SVI)

• Taskforce on Nature-Related Financial Disclosures (TNFD)

• B Impact Assessment

• Impact Frontiers Impact Management Norms

• SDG Impact Standards

• OECD

• World Benchmarking Alliance (WBA)

• Impact Capital Managers

Investors, managers, and entrepreneurs are left to choose from this complex ecosystem as they develop their impact measurement and reporting procedures. The disjointed nature of these efforts, though often well-developed individually, complicates benchmarking and comparison efforts, can create room for “impact washing,” and stunts the development and improvement of IMM.

Consolidation efforts

Impact Measurement Platform

Despite the crowded state of the IMM landscape, important strides have been made in the effort to streamline initiatives and develop collaborative best practices. In 2021, the Impact Management Platform (IMP) was established to this end and consists of 18 members and 1 observer to date. The platform evolved from the Impact Management Project which has since concluded its work. The IMP aims to “drive clarity and to foster a more coherent ecosystem of standards, frameworks and other resources for managing sustainability-related impacts.” Member organizations are shown below (courtesy of the IMP):

The consortium has divided its efforts into phases, the first of which has focused on developing foundational best practices for the classification of industries and sustainability topics, detailed in two recently-published, in-depth analytical reviews. These classifications serve as the foundation for numerous economic, financial, and regulatory activities, yet many approaches are in play today, often with differing methodologies and scopes. 

Cohesion around such baseline categories can pave the way for greater IMM harmonization moving forward, as they are crucial for defining sustainable practices, managing sustainability-related issues, and analyzing and disclosing sustainability data. 

Some of the key recommendations from the IMP’s reports include:

• Developing industry classifications with IMM as a core use case consideration

• Grouping sectors during the classification process in a way that aligns with societal needs

• Aligning granular clusters of economic activities with pertinent value chain characteristics

• Structuring sustainability classifications more consistently around an overarching framework put forward by the IMP

• Continued collaboration among international organizations to promote further alignment of resources

The next phase of the consortium’s work (2025-2027), has commenced, so further collaboration and streamlining within the IMM space is on the horizon.

Case studies 

As international collaboration progresses, how are investors currently navigating impact measurement?

Many actors are incorporating prominent frameworks and standards into their approaches, yet specific resources used and how they are applied can vary widely.

 Nuveen

For instance, at the investment level, global asset management firm Nuveen utilizes a blend of IRIS+ and proprietary metrics for each of its companies, but also sets headline indicators of performance based on logic models. The firm also ties company goals back to the SDGs and has engaged impact verification firm Bluemark for independent analysis. Nuveen is a founding signatory to the IFC Operating Principles for Impact Management.

Calvert Impact

Nonprofit impact firm Calvert Impact incorporates several resources across different stages of its investment lifecycle, including the SDGs, IRIS+, HIPSO, and IFC Operating Principles, and Impact Management Project’s Five Dimensions of Impact (now hosted by Impact Frontiers). It utilizes its own structural framework which lays out three layers of impact at the investor, portfolio, and community levels, and has developed its own Impact Scorecard.

SJF Ventures

Venture firm SJF takes a different approach; it does not align itself with a specific external framework, nor does it apply a uniform internal protocol to company-level impact metrics. Instead, it utilizes high level principles like the IMP’s 5 dimensions to inform its collaborative work with portfolio companies in data collection. Kelsey Jarrett, Director of Impact at SJF, notes that “SJF takes the view that it is more important for companies to collect and report on the right impact data for their business model, rather than what would fit a framework,” though the tradeoff there is greater difficulty in aggregating impact data.

From a bird’s eye view, according to GIIN’s 2024 State of the Market report:

• 70% of survey respondents utilized common impact resources and tools such as GRI, HIPSO, and IRIS+

• 64% relied on academic or empirical evidence aligned with a Theory of Change framework

• 64% developed their own impact targets

Making Sense of It All: Best Practices 

There is of course no one-size-fits-all approach to impact measurement and management, as size, capacity, budget, goals, and scope will vary across investors and asset managers and have significant implications for the IMM process. 

We spoke with Drew Payne, CEO of UpMetrics, on key considerations investors should take into account as they integrate IMM:

• Establish clear goals: What specific indicator(s) do you aim to influence with your capital? These should “establish a foundation for directional, long-term alignment with portfolio companies before investment.”

• Maintain flexibility with metrics: “Leveraging preexisting metric libraries enhances comparability and benchmarking across investments, but investors must allow for flexibility in integrating context-specific indicators to ensure that impact measurement reflects the unique business models of each portfolio company.”

• Communicate and collaborate: Misaligned metrics between investors and portfolio companies poses a significant challenge, and often occurs “due to limited upfront discussions about the intended impact of a portfolio company versus the impact metrics investors are required to report across their broader portfolio to their funders.” It is therefore “essential for investors and portfolio companies to collaborate in defining meaningful, aligned metrics from the outset—while allowing space to iterate and refine them post-investment.”

• Continuously adapt and learn: “Impact frameworks should be dynamic, evolving based on lessons learned, market trends, and real-world feedback through effective collaboration and communication between investors and portfolio companies”

• Align impact metrics with financial performance evaluation: “Too often, impact measurement is treated as a compliance requirement rather than an integral part of investment diligence and portfolio management. To drive real value, impact metrics with time-boxed targets should be embedded into decision-making, risk assessment, and financial performance evaluation—mapping to key business drivers such as revenue and gross margins”

High-level principles and frameworks like the IFC Operating Principles, SDGs, and PRI can serve as guideposts, while emerging metrics standards such as IRIS+, HIPSO, and GRI Standards can be important tools for more rigorous evaluation and reporting. Regardless of the specific tools chosen, effective communication between stakeholders around these choices is essential for continued progress. 

The task ahead is to better harmonize and align these resources to create a clearer and more streamlined set of tools for investors and entrepreneurs. Doing so will help to demystify the IMM landscape and drive forward positive social and environmental impact.