Measuring Impact

Professor Kevin Haines
March 2021

In this briefing note we provide some brief guidance on measuring and demonstrating impact in investing.

There is much and growing interest in impact investing. We have produced a previous briefing note on impact investing (I can provide a copy if asked) where it was defined as:

"... investments made with the intention of generating a positive, measurable social and environmental impact, alongside a financial return."

Talk about impact investing is, of course, quite hollow unless one can measure and demonstrate the said impact. Measuring and demonstrating impact can be an extremely complex activity and if you have no expertise in this area you might consider seeking expert advice. To move matters forward, however, there are three key stages to measuring and demonstrating the impact of your investment or company’s activity.

1 – What change/impact?

It is absolutely necessary to be as clear and specific as you can about what precisely the change is that you are intending to bring about with your investment (or your company’s activity). What impact, exactly, are you trying to make? This change or impact should be described in terms of specific outcomes. If you cannot articulate this, you will never know whether you have achieved the desired result/outcome.

2 – Theory of change

You should describe your theory of change. In other words,you should have a clear idea of how your investment (or your company’s activity) will bring about the desired impact/outcome(s). Hit and hope is not good enough. You must have a demonstrable link between investment oractivity and pre-defined outcome(s). Noting, of course, that cause and effect are in a complex relationship with one another and that achieving change may take time.

3 – Evaluate your impact

It is, of course, absolutely essential to evaluate, measure and demonstrate the impact of your investment (or company’s activity). Unless you know and can demonstrate the change your investment (or company’s activity) has brought about, how do you know whether you are achieving your intentions/objectives or not? This evaluation should be consistent with your objectives, ESG/SDG considerations (i.e. don’t ignore the uncomfortable) and, ideally, have a degree of independence.Finally, don’t be afraid of learning from your experience. Change is rarely linear, it is often complex and sometimes contradictory. Be honest, open and eager to learn (and to spread your learning) – this will maximise the impact of your experience.

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