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Publications
& Insights

Resources created and curated to support the growth of impact investing, for those new to the field and for experienced practitioners.

The Challenge of Balancing Realistic and Rigorous

Measurement and evaluation is complex and expensive.  The pioneering nature of impact investing can make it difficult to measure and report on outcomes with academic rigor.  Fund managers are placing capital in geographies and through instruments that are unconventional, in order to achieve uncommon social and financial returns.  They are spending a significant amount of time and resources to quantify the impact outcomes of these investments, but an oft-cited challenge is finding the right balance between a rigorous, standardized process and authentic, heterogeneous evaluation. 

Traditional research institutions doing randomized control trials are well funded and work on neatly scoped inquiries to achieve the statistical significance and accuracy sought in academic study.  However, impact investing often works in markets that are not well-developed, leading fund managers to invest in a wide variety of efforts in pursuit of social or environmental outcomes.  Across a varied portfolio, fund managers report that the most basic step - defining relevant impact indicators to be a measurement standard across investments - can be a critical obstacle to impact reporting. For example, the Media Development Investment Fund works with a wide range of media clients in over 30 countries around the world. They have found that, “measurements that work well in one context may be impossible or illogical in another. Rationalizing these differences is an ongoing challenge.”

Defining a few highly relevant outcome metrics can help to focus efforts and keep reporting aligned with the core impact objectives. For example, to keep their measurement system financially sustainable and aligned with their objectives, Medical Credit Fund believes that, “it is better to have five key indicators than to track 25 and compromise on accuracy and significance.”  The fund has selected a set of indicators related to patients and care, loans, and capacity building that “relate closely to the investees’ operational practice to increase relevance and keep reporting and data quality manageable.” (Medical Credit Fund) Considering how impact measurement will encumber portfolio organizations and then making efforts to integrate measurement into day-to-day management is another best practice that comes through from leading fund managers.

Clearly defining their core focus has helped Medical Credit Fund to keep their reporting practices firmly rooted in the fund’s objectives and measurements that advance those objectives and strike a balance between investors’ expectations and reality on the ground.

“Investors often bring their own impact objectives to the table and do not always have realistic expectations regarding impact measurement, especially in relation to assessing the impact on the final beneficiaries. This can be challenging to accommodate, while ensuring a practical, reliable, affordable measurement system relevant to the fund’s own objectives. The focus on quantitative measurements can distract from the impact on a more systemic level, with the risk of the impact indicators becoming the drivers instead of a measurement tool.”

As impact investing fund managers refine their tools and methods, one of the most helpful insights is to be transparent about both challenges and promising approaches.  Media Development Investment Fund makes it a practice to “clearly acknowledge limitations and encourage comments from outside observers.”  MDIF includes methodological challenges in the Impact Dashboard that they produce each year because they have found that, “making the process transparent enhances our work and encourages productive discussion of impact measurement.” (Media Development Investment Fund) This series of themes within impact reporting from IA 50 fund managers is also intended to be part of that transparent, productive conversation. By collecting and disseminating insights and best practices from leading impact investors, ImpactAssets hopes spark collective innovation to overcome challenges to produce high quality impact reporting.

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Impact investments are investments made into organizations and funds that generate measurable social and environmental impact as well as financial returns.