As explained in our last article; “Measuring Impact Investing” the rise of Impact Investing, make Measurement fundamental to understanding the social or environmental impact that an investment may have. During this article we will touch other impact measurement methods.
GIIN Impact Metrics
The Global Impact Investing Network (GINN) has also developed its own metrics that are designed to measure the social, environmental and financial performance of an investment.
The GIIN annual impact survey has recognized the unique role that impact investing will play in achieving the SDGs, and this is reinforced by the finding that more than 60% of organizations surveyed actively track their investments against the SDGs or plan to do so soon.
UN Sustainable Development Goals
Third Party Assessment
When facing the question of how to quantify the social return on an investment, according to the Impact Investing Hub there are three options available.
- Do it yourself
On one end of the spectrum, measurement may be a collaborative effort between the social enterprise and the charitable trust or foundation, who may be heavily involved in decisions around metrics and benchmarks. At the other end, the social enterprise may work independently to provide impact assessments to the trust or foundation, who in turn can audit the impact reporting when necessary. This is based on the belief that the social enterprise itself is generally best positioned to report on its own social impact, just as it provides financial reports to investors.
- Measurement through a fund manager
Individual investors may elect to have a fund manager invest on their behalf. The fund managers will often conduct impact assessments as they see appropriate to the investment, and report to the investors. An example of this approach would be that taken by Australian Impact Investments, described later in the chapter.
- Measurement through a 3rd Party
Another alternative is to leverage services offered by third party intermediaries that can help social enterprises and investors conduct impact measurement. Typically, these intermediaries will have their own proprietary approach to measuring impact. A one-off fee or subscription may be required to access these services.
The social impact industry is poised to grow at an encouraging rate, with ESG being positioned further and further up the priority list when it comes to investment.