As the sustainable market grows increasingly competitive, the vast majority of investors are lacking insights into impact performance that would enable them to differentiate themselves from their peers, a study has found.
The non-profit organisation Global Impact Investing Network (Giin) has released the second edition of its impact measurement and management (IMM) survey, in which it assesses IMM practice across the industry.
Giin’s director of IMM, Kelly McCarthy, commented: “The market is maturing rapidly and demand for more and better impact performance management is only increasing.”
The NGO surveyed a total of 278 impact investors between July and September 2019, with the majority of interviewees headquartered in developed markets (82%) and 16% in emerging markets.
Giin defines impact investors as those who invest with the intention to create positive social or environmental impact alongside financial return; use evidence and impact data in investment design; manage their impact performance; and contribute to the growth of the industry.
Among the survey respondents; 67% are fund managers, 9% foundations, 5% development finance institutions and the rest are other types of organisations.
Collectively, 275 respondents manage $246bn (€223.2bn) in impact investing assets, as of the end of September 2019. This represents almost half of the total global impact investing market, estimated at $502bn by Giin.
Lack of comparable performance data
The study found that most respondents use their own data to assess their impact performance (87%), but they lack comparable, market-level insights.
As the market matures and competition increases, the demand for insights on impact performance rises, Giin found.
A majority of 89% of investors cited a lack of transparency on impact performance as a key challenge facing the market.
They particularly look for market-wide impact performance data: most commonly impact benchmarks (92%), followed by pooled impact data (86%), case studies on IMM best practices (86%) and tools to strengthen impact screening (83%).
Existing benchmarking tools
The report also names a number of existing IMM tools, such as:
- An approach described in Giin’s series Evaluating Impact Performance, which allows investors to aggregate and compare impact performance results;
- A methodology called Impact Multiple of Money, designed by US fund manager TPG Growth and the Bridgespan Group, a US-based social-impact advisory firm, and others to estimate the financial value of the impact generated per dollar invested; and
- Evidence-based benchmarks for investors developed by the World Benchmarking Alliance, a partnership organisation that benchmarks companies’ impact performance in terms of the UN Sustainable Development Goals.