The Global Impact Investing Network
New evidence that the world of impact investing is maturing: a newly released survey from the Global Impact Investing Network (GIIN). Called The State of Impact Measurement and Management Practice, the GIIN’s second biennial report on the topic reveals that impact investors are a lot more sophisticated when it comes to the assessment and management of social and environmental impact.
The bottom line: Impact investors no longer have to convince colleagues of the importance of measurement and management (IMM). As a result, they’re now focused on integrating their measurement and management practices into all their investment decision-making. Accurate insight into impact performance, of course, is critical to the further growth of the impact investing industry.
“Impact management is a requirement for all credible impact investors,” says Sapna Shah, managing director. “It’s not optional anymore.”
For impact entrepreneurs, it also means, according to Shah, that potential investors will be stepping up their expectations for reliable and comprehensive impact performance reporting. While that might be a challenge, it’s also an opportunity. “This offers enterprises a way to differentiate themselves,” she says. Plus, presenting a strong IMM approach can help create better relationships with investors. “It provides the basis for a far deeper conversation and potentially a more multi-faceted relationship,” she says.
Impact management means the series of steps needed to manage relevant information, such as how to collect, assess and interpret data in a way that improves performance, as well as to set impact objectives and, for direct investors, to understand how that informs the selection of investments. It also includes methods for comparing impact performance or potential to other investments.
According to Shah, the report, which captured data from 278 impact investors and 109 two-year repeat respondents, shows that more investors are demanding this information to help them understand how much progress is being made toward achieving the desired impact and reporting that to stakeholders. Plus, “Investors see value in impact management from a financial perspective,” she says.
Specifically, 100% of respondents said that impact measurement and management is important for understanding whether they are progressing towards their impact goals. Ninety percent or more of respondents noted some progress in the past three years in the sophistication of IMM tools and frameworks (92%) and the availability of professionals with IMM-relevant expertise (90%).
The findings also show that work still needs to be done, however. For example, while impact investors are beginning to coalesce around certain IMM tools and frameworks, such as the Sustainable Development Goals (SDGs)—use of the SDGs has almost doubled since the first survey—they’re concerned about a surfeit of tools and frameworks out there. Plus, investors still struggle to compare impact results across the market. In particular, they point to a lack of transparency on impact performance as a major challenge.
According to Shah, the GIIN also is working with impact investors in different sectors on uniform ways to interpret the data they collect. It started with housing and access to clean energy. Next will be agriculture and financial inclusion.