Impact investments measurement best practices | Sopact Perspective (2024)

Impact investors play a crucial role in maximizing the impact of impact funds. It is essential to adopt the right approach to ensure effective impact measurement and management. In this article, we will explore the approaches that work well and those that fail miserably in impact investment measurement.Impact Investors play a critical role in maximizing the impact of Impact Fund.


Impact Investors must focus on increasing the portfolio's capacity to collect necessary stakeholder data by aligning to the Five Dimensions of Impact to make evidence-based impact decisions and then share insights and maximize the impact.

The focus of impact investors must be on your additionality rather than impact data acquisition to serve the right demographics.

Stages of Impact Investing

To maximize the impact of an investee portfolio, impact investors must follow a simple yet effective engagement process. Let's delve into the four stages of impact investing:

  1. Pre-Investment Estimation of Impact: The impact investing process typically begins with estimating the potential impact of the investee. This stage helps assess the expected outcomes and align them with the investment goals.
  2. Planning for Impact: During the deal negotiation phase, impact investors must incorporate impact planning. This involves setting clear objectives and strategies to maximize the intended impact.
  3. Monitoring Impact: Continuous impact monitoring becomes crucial once the investment is made. Investors and investees should establish an agreement to monitor impact throughout the investment's lifecycle.
  4. Evaluation of Impact: The final step of the impact investing process involves evaluating the achieved impact when the investment reaches its completion. This evaluation provides valuable insights and highlights areas that require improvement.

It is important to note that impact investing and impact measurement go hand in hand. However, the current approach followed by asset managers and investors is often fragmented and inconsistent, despite the availability of various standards, frameworks, tools, and certifications.

Impact investments measurement best practices | Sopact Perspective (1)

The Impact Investing process typically starts during the pre-investment period by estimating the impact of the investee. The next step is planning for the impact, and this process is ideally done during the deal negotiation. Once the investment has been made, the third step begins, during which the investors and investee agree on monitoring impact throughout the lifecycle. Finally, when the investment is complete, and the investor exits, the impact is evaluated, and this is the final and the last step of the impact investing process. It is quite possible that the evaluation might highlight fundamental things that are not working. It can be concluded that Impact investing and impact measurement and management are two sides of the coin.However, this approach is quite fragmented and incoherent.Despite the prevalence of various standards, frameworks, tools, and certifications, the approach adopted by every asset manager/investor is quite inconsistent.

According to GIIN, the trend shows that the impact investing industry is experiencing significant momentum as many large and small firms enter the impact investor markets every week. The industry has received immense support from governments and academics too. But the biggest challenge is that 66% of investors are concerned about impact washing, and only a mere 35% of investors are concerned about combating and validating impact results.

Impact investments measurement best practices | Sopact Perspective (2)

Combatting Impact Washing

One of the challenges faced in impact investing is the prevalence of impact washing. How can you identify whether investors or investees are engaging in impact washing? Here are a couple of key indicators:

  1. Lack of Stakeholder Data Collection: If investors or investees do not actively collect data from stakeholders and only report output activities, it is a clear sign of impact washing.
  2. Superficial Comparison and Reporting: Another indicator is when results are compared based on selective stories rather than evidence. Adding the Sustainable Development Goals (SDG) icon to reports without aligning with the SDG goals and targets is a red flag.

Impact investments measurement best practices | Sopact Perspective (3)

Improving the success rate of Impact investments

To improve the success rate of impact investments, impact investors should focus on two key aspects: ensuring the sustainability of impacted exits and building internal capacity for impact learning.

The sustainability of impacted exits is crucial to optimize both social impact and financial profit. The impact is an iterative process that requires continuous learning and improvement. Therefore, impact investors should prioritize building the capacity of investees in each cycle, enhancing their ability to generate positive outcomes.

OPIM operation, or Impact Management, has developed nine principles for strategic intent in portfolio management and impacted exits. One vital principle is assessing the expected impact of each investment using a systematic approach. This approach emphasizes improving the capacities of investees rather than solely relying on metrics during reporting.

Impact investments measurement best practices | Sopact Perspective (4)

Reasons for not measuring social impact

Several reasons contribute to the hesitation in measuring social impact:

  1. Insufficient Financial Resources: Limited financial resources hinder the implementation of impact measurement strategies.
  2. Lack of Knowledge: Inadequate knowledge of impact management and measurement leads to reluctance to pursue impact measurement.
  3. Insufficient Human Resources: The absence of dedicated personnel for impact measurement activities poses a challenge.
  4. Undefined Impact Goals: Without clearly defined impact goals, measuring impact becomes challenging.
  5. Lack of Appropriate Tools: The absence of suitable tools for impact measurement further complicates the process.
  6. Lack of Priority: Some investors do not prioritize impact measurement due to various reasons.

Maximizing the impact of Impact fund

To maximize the impact of an impact fund, consider the following steps:

  1. Collect Necessary Stakeholder Data: It is crucial to collect relevant data from stakeholders. The Impact Cloud by Sopact provides insights through qualitative and quantitative data analysis.
  2. Make Evidence-Based Impact Decisions: Base impact decisions on solid evidence and data analysis. This ensures the effectiveness of the investment strategy.
  3. Increase Entrepreneurs' Capacity: Focus on building the capacity of investees to enhance their ability to create impact.
  4. Share Insights: Share valuable insights gained from impact measurement with other stakeholders. Collaboration and knowledge sharing amplify the overall impact.

By aligning data collection with the five dimensions of impact—What, Who, How much, Contribution, and Risk—organizations can better serve the demographics they aim to impact, such as race, ethnicity, socioeconomic conditions, and location.

It is crucial not to prioritize financial profitability over social impact. Neglecting social impact can lead to negative consequences and the premature discontinuation of investments. Instead, conduct impact experiments, optimize the process through the impact management cycle, and maximize impact throughout the journey.

Impact investments measurement best practices | Sopact Perspective (5)


Impact investors play a vital role in driving positive change through impact investments. By adopting effective impact measurement and management strategies, investors can optimize social impact, achieve financial profitability, and contribute to a sustainable future. It is essential to focus on aligning stakeholder data collection, making evidence-based decisions, and continuously improving investee capacity. By doing so, impact investors can maximize the impact of their investments and create a lasting positive change in society.

Learn More: Impact Measurement

Impact investments measurement best practices | Sopact Perspective (2024)


What is the best way to measure impact? ›

How To Measure Impact
  1. Figure out what you're trying to accomplish: the real mission. You can't think about impact until you know what you're setting out accomplish. ...
  2. Get real numbers. You need to 1) show a change and 2) have confidence that it's real. ...
  3. Make the case for attribution. ...
  4. Calculate bang-for-the-buck.

How to measure impact investments? ›

The method consists of six steps.
  1. Assess the Relevance and Scale. ...
  2. Identify Target Social or Environmental Outcomes. ...
  3. Estimate the Economic Value of Those Outcomes to Society. ...
  4. Adjust for Risks. ...
  5. Estimate Terminal Value. ...
  6. Calculate Social Return on Every Dollar Spent.

What is the impact measurement approach? ›

Impact measurement is a systematic process organizations use to assess and analyze their programs, interventions, or policies' social, environmental, and economic effects. This practice uses tools to measure change and the impact of initiatives on communities or environments.

What are the three components of impact investing? ›

The main elements of impact investing include:
  • Intentionality. Impact investing is purpose-driven. ...
  • Measurable Impact. Impact investments have measurable, quantifiable and transparent outcomes. ...
  • Expected Returns. Like traditional investments, impact investments involve an assessment of risk and return.
Oct 25, 2023

What is the framework for measuring impact? ›

An impact measurement framework builds on your theory of change by identifying the data you will collect to understand, evaluate and demonstrate your impact. It consists of measures that your organisation will use to evaluate the tangible change that arises from your activities.

How do you measure impact statistically? ›

Some of the points we will cover are:
  1. Designing impact evaluations.
  2. Modelling randomness in the measurement process.
  3. Moving from statistical significance (p-values) to measures of effect size and confidence intervals.
Mar 17, 2022

What are the best practices in impact reporting? ›

A good impact report should have accurate data. It should also show evidence and present both positive and negative impacts. Additionally, it should tell a good story and have a visually appealing design. Lastly, it should meet global standards and stakeholder expectations.

What is the impact investing methodology? ›

Impact investing relies on measuring the specific change that an investor's capital has enabled. Most impact-focused investing strategies help investors focus on economic activities that address specific sustainability challenges outlined by the United Nations Sustainable Development Goals (SDGs).

What is the impact investment model? ›

Impact investing is an investment strategy that seeks to generate financial returns while also creating a positive social or environmental impact. Investors who follow impact investing consider a company's commitment to corporate social responsibility or the duty to positively serve society as a whole.

What are the 5 dimensions of impact measurement project? ›

The five dimensions include what the intended outcome is, who experiences it, how much of the outcome is experienced, the contribution of the business to that outcome, and the risk that the impact doesn't happen as planned.

What are the four steps of impact measurement and management? ›

The course emphasizes ways to improving decision-making for impact on SDGs through changes enterprises and investors can make in strategy, management approach, transparency, and governance, which we have translated into 4 universal practices of impact measurement and management – SET STRATEGY, INTEGRATE, OPTIMIZE and ...

How do you measure financial impact? ›

How can you identify the financial impact of each activity in your value stream?
  1. Define the value stream.
  2. Assign costs and revenues to each activity.
  3. Calculate the value-added and non-value-added components of each activity.
  4. Evaluate the financial impact of each activity.
  5. Identify opportunities for improvement.
Sep 21, 2023

How do you evaluate impact investing? ›

Use quantitative evidence to asses impact potential: We use economic, scientific, and social science research to estimate a company's impact potential. Assess impact potential in due diligence: We assess impact of companies during live diligence, elevating it to be on par with estimates of financial return.

What are the four core characteristics of impact investing? ›

Characteristics of impact investing

These four characteristics are (1) Intentionality, (2) Evidence and Impact data in Investment Design, (3) Manage Impact Performance, and (4) Contribute to the growth of the industry.

What are the core principles of impact investing? ›

Impact investing is marked by an intentional desire to contribute to measurable social or environmental benefit. Impact investors aim to solve problems and address opportunities. This is at the heart of what differentiates impact investing from other investment approaches which may incorporate impact considerations.

How do you evaluate an impact? ›

Impact evaluations should be based on our infor- mation needs. Impact evaluations answer cause-and-effect questions; that is, they determine whether specific programme outcomes (usually a subset of those defined in the results chain) are the result of the intervention.

How do you measure performance impact? ›

What are the best ways to measure the impact of your performance improvement initiatives?
  1. Align with your goals.
  2. Choose the right metrics.
  3. Use a balanced approach.
  4. Establish a baseline and a target.
  5. Monitor and report.
  6. Evaluate and improve.
  7. Here's what else to consider.
Nov 8, 2023

What is the method of measuring good impact strength? ›

In the Izod Impact Test, a rectangular specimen is clamped securely at one end, then struck by a weight at the end of a pendulum. As the pendulum continues its swing, it moves a pointer which records the amount of force used up in breaking the specimen.


Top Articles
Latest Posts
Article information

Author: Errol Quitzon

Last Updated:

Views: 5423

Rating: 4.9 / 5 (59 voted)

Reviews: 82% of readers found this page helpful

Author information

Name: Errol Quitzon

Birthday: 1993-04-02

Address: 70604 Haley Lane, Port Weldonside, TN 99233-0942

Phone: +9665282866296

Job: Product Retail Agent

Hobby: Computer programming, Horseback riding, Hooping, Dance, Ice skating, Backpacking, Rafting

Introduction: My name is Errol Quitzon, I am a fair, cute, fancy, clean, attractive, sparkling, kind person who loves writing and wants to share my knowledge and understanding with you.