According to the Global Impact Investing Network, “Impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. Impact investments can be made in both emerging and developed markets, and target a range of returns from below market to market rate, depending on investors’ strategic goals.”
The organization goes on to say, “The growing impact investment market provides capital to address the world’s most pressing challenges in sectors such as sustainable agriculture, renewable energy, conservation, microfinance, and affordable and accessible basic services including housing, healthcare, and education.”
Impact Investing: Many Definitions of Success
Sometimes called environmental, social, and governance (ESG) investing, impact investing produces a wide range of benefits, both outside a firm and within it. But it comes with some uncertainty around the criteria to use to assess the degree of impact made.
One of the questions we hear most often from impact investors, foundations, and nonprofits that are searching for an impact investment tracking tool is:
“How are other organizations tracking impact investing metrics?”
It’s certainly understandable in a relatively new concept such as impact investing to be curious about how competing organizations are faring and what tools they are using.
In many cases, learning from the successes and mistakes of others is a smart strategy. Doing so can save you a great deal of time and effort.
But for organizations new to impact investment metric tracking, “What is everyone else doing?” is not the question to be asking.
Impact investing is a very specialized type of investing, where there are many ways to measure progress toward your goals. There is no “one way fits all” when it comes to evaluating impact investing.
What You Should Be Asking About Impact Investing
Unfortunately for those looking simply to copy industry leaders, the methods those organizations use to track metrics tend to be specific to their business. It’s part of what makes each of them unique, and what should make you unique as well.
Consequently, it may be easy for us to give you a metric or definition that someone else uses to track their impact investing, but there is no reason to believe it will make sense for your business.
No metric tracking solution should tell you exactly which numbers to track. That’s because solution providers understand that the ways that organizations end up tracking metrics are driven by their specific business models and their specific perspective on success.
Determine What To Track For Your Impact Investing Initiatives
The approach we recommend you take when searching for a metric tracking tool is more inward-looking.
Rather than asking how other people are assessing their impact investing, we suggest that you think about the change you’re hoping to produce and the returns you’re looking to achieve.
From there, consider which indicators will give you the clearest picture of your successes and your areas for improvement.
Then, you should leverage proven methodologies for collecting data on those metrics. And whatever those methodologies are, they have to be supported by technology designed to enable effective impact investing tracking.
This doesn’t mean you have to scrap all your existing processes. You can continue to do the things you have been doing. But the new system can help you better organize, track, and report on the data that is already being collected.
In doing so, it gives you a clearer understanding of the impact you’re making and how you can amplify it.
How Is Impact Investing Changing?
Do you aspire to track metrics or use the IRS taxonomy to gain a competitive differentiator but are unsure where to begin? You’re not alone.
Many impact investors find themselves with the same dilemma. Check out our blog post on changing expectations for impact investors for some excellent insights.
