News

Sep 23, 2023

Impact investors embrace measurement tools, GIIN reports

Impact investors are increasingly using impact measurement and management tools in their investment processes, according to a report issued Monday by the Global Impact Investing Network. The GIIN

Impact investors are increasingly using impact measurement and management tools in their investment processes, according to a report issued Monday by the Global Impact Investing Network.

The GIIN report, Impact Measurement and Management Practice, is based on data from 308 impact investors. It found that 77% of them align their impact priorities with global development agendas, such as the Paris climate accords and the United Nations Sustainable Development Goals. Impact investors use a variety of impact accountability mechanisms, with 48% undergoing audits on impact practice or performance.

Among impact investors with specific quantitative impact targets, 61% set them at the investment level and 52% of investors do so at the fund level, the report found.

The report also found that 78% of the investors use the GIIN's IRIS+ tool for measuring impact, while a smaller percentage reported using other reporting tools.

While more investors are using impact data to inform their decisions, one headwind is the lack of comparability. The report found that only 15% of impact investors are able to compare their impact results to peer groups, and 76% of them considered it a significant or moderate challenge to impact investing.

New initiatives to address the lack of peer comparisons are underway, along with performance benchmarks on issues including financial inclusion, agriculture and clean energy, said Amit Bouri, CEO and co-founder of GINN, in an interview.

"We are trying to drive a race to the top. We want investors to be moving the needle on these issues," he said.

The latest report "really reflects how impact investors are incorporating impact measurement and metrics into their portfolios. What we see is a shift from impact reporting to real impact performance and management. There is a convergence around measurements and standards," Mr. Bouri said.

Pension funds and insurance companies are becoming a growing source of impact investment capital, representing the largest share of capital raised by impact fund managers, roughly 20%, and growing 32% annually in the past five years, he said. "As we see more pension funds move capital to impact investment … impact measurement becomes a very powerful approach," Mr. Bouri said.