{"id":2128,"date":"2020-12-01T11:34:27","date_gmt":"2020-12-01T11:34:27","guid":{"rendered":"https:\/\/idronline.org\/2020\/12\/23\/impact-investing-measurement-management\/"},"modified":"2025-11-05T21:04:22","modified_gmt":"2025-11-05T15:34:22","slug":"impact-investing-measurement-management","status":"publish","type":"post","link":"https:\/\/idronline.org\/kn-in\/impact-investing-measurement-management\/","title":{"rendered":"Are investors thinking about impact?"},"content":{"rendered":"

In recent years, the idea of impact investing<\/span><\/a>—the act of investing with the intention of generating positive social and environmental impact, alongside a financial return—has gained ground in India. According to the recent IIC-Asha Impact report<\/span><\/a>, the Indian impact investing industry has reached more than 490 million people with a cumulative equity investment of USD 11 billion spread across 600 impact enterprises, over the last ten years.<\/span><\/p>

Impact measurement and management (IMM) is a critical component of impact investing. As a concept, impact measurement is not new and has been prevalent in international development for decades, through the monitoring and evaluation component of social or environmental projects. However, the integration of IMM into an impact investor’s decision of whether to invest or not, is a fairly new construct. <\/span><\/p>

Simply put, IMM is defined as the process of measuring, assessing, and improving the impact of an investor’s portfolio on people and the planet. It enables investors to assess the nature and extent of the investee’s impact at each stage of the investment life cycle, and then apply the learnings to define and refine their investment strategy.<\/span><\/p>

\"What<\/a><\/div>

Impact is becoming an important aspect of evaluating the overall performance of an investment<\/span>.<\/span><\/p><\/blockquote>

As we look ahead to a post-COVID-19 world, impact is becoming an important aspect of evaluating the overall performance of an investment<\/span>. This trend towards focusing on impact is visible through a number of recent developments, such as outcome-based financing models<\/span><\/a><\/span> (which includes social impact bonds and development impact bonds), and the setting up of an Indian social stock exchange<\/a>.<\/span><\/p>

Given this, the Impact Investors Council<\/a> (IIC) collaborated with KPMG<\/a> to publish a report<\/span><\/a> which captures the current state of IMM practices among impact investors in India. This was done by surveying 26 leading impact investors active in India, through a series of virtual interviews conducted between May and August 2020.<\/span><\/p>

The report examines their IMM practices at two levels—the macro and the micro—and develops an IMM framework to identify impact across five stages of the investment life cycle. This framework can also serve as a reference for new investors looking to integrate IMM into their investment process.<\/span><\/p>

Related article: This is the most opportune time for impact investing<\/strong><\/a><\/p>

Progress, challenges, and common practices at the macro-level<\/b><\/span><\/h3>

More awareness on IMM has helped produce more research, explore tools and frameworks, and attract more participation from skilled professionals. Additionally, technological advancements have improved the measurement process. This has given investors the confidence to report the impact being created. <\/span><\/p>

\"donate<\/a><\/div>

Investors are also consistently seeking out sophisticated measurement tools and frameworks to counter impact washing ie, the practice of making impact-focused claims without truly demonstrating positive social or environmental impact.<\/span><\/p>

The industry hasn’t pushed measurement to the backburner, despite cost constraints and limited availability of evidence.<\/span><\/p><\/blockquote>

The report noted that the industry hasn’t pushed measurement to the backburner, despite cost constraints and limited availability of evidence. In fact, investors have shifted from a search for ‘plain accountability’ to ‘impact contribution’, where they are now keen on assessing their ‘additionality’ ie, the added value they bring to investees and the impact they generate.<\/span><\/p>

Investors continue to directly spend a minimum of five percent of their operating budgets on IMM. With scale, stage of investment, and maturity, we expect this spend to increase to 15-20 percent. <\/span><\/p>

While the industry is now on the path to recognise and rectify various gaps that exist, there are some challenges which are more difficult to counter:<\/span><\/p>