1) Impact measurement and management is important for impact investors to understand their social and environmental performance, improve investment decisions, and avoid "impact washing". 2) There have been several developments in impact measurement standards and tools over the past decade, including the IRIS catalog of metrics, the Operating Principles for Impact Investing, and the DELTA and AIMM frameworks. 3) Recent frameworks like IRIS+ and methods like those from inFocus aim to increase standardization, comparability, and practical guidance for impact investors in how to define goals, select metrics, and manage performance.

1. GOOD MEASURES:
THE CASE FOR
QUANTIFICATION
IN IMPACT INVESTMENT
PABLO E. VERRA
January2020

2. Impact Measurement: The Challenges
1
© Pablo E. Verra – 2020
Source: Schönherr N., Reisch L.A., Farsang A., Temmes A., Tharani A., Martinuzzi A. (2019) Implementing Impact Measurement and
Management. In: Schönherr N., Martinuzzi A. (eds) Business and the Sustainable Development Goals. Palgrave Pivot, Cham.

3. Executive Summary
2
The impact investment sector has duly recognized that impact measurement is central to legitimizing the
practice of impact investing. Increasingly, investors want to have more detailed social and environmental
performance data so they can scrutinize it as they do with financial data. This enables investors to have a
better understanding of social returns on investment and re-allocate investment capital accordingly.
• Across a portfolio, impact measurement facilitates learning, enabling investment decisions to be
better tuned towards achieving impact;
• Companies who are able to demonstrate that their business has a broader impact may also be more
successful in attracting investment capital;
• Increased transparency and accountability is expected to contribute to the mobilization of greater
capital investments;
• However, impact measurement is complex in practice, and varies in approach and rigor, with a number of
methodologies and practices emerging from different organizations:
• This carries a risk for the emerging field of impact investing; if a certain level of rigor in impact
measurement is not established across the industry, the label “impact investing” runs the risk of
becoming diluted and used merely as a marketing tool for commercial investors.
• Additionality is an important consideration in thinking about impact. Additionality refers to
whether the target social outcomes would have occurred without the investment:
• Investor-level additionality is the additional impact the investor is creating on the enterprise;
• Enterprise level additionality is the additional impact that the enterprise has on society.
© Pablo E. Verra – 2020

4. What Is Impact Measurement & Management (IMM)?
3
Impact measurement and management includes identifying and considering the positive and negative
effects one’s business actions have on people and the planet, and then figuring out ways to mitigate the
negative and maximize the positive in alignment with one’s goals. Impact measurement & management is
iterative by nature.
1. Set Goals & Expectations: goals should consider the effects an investment has on people and/or the
planet and balance investor expectations for risk, return, liquidity and impact;
2. Define Strategies: there are many pathways to achieving impact goals and meeting expectations.
Investors should consider what pathways make the most sense for their portfolio, investment expertise,
or client demand. It is also imperative to use evidence during this phase;
3. Select Metrics & Set Targets: investors should use relevant output, outcome, and proxy metrics to set
targets (as appropriate), track performance, and manage toward success. Impact metrics should
ultimately deliver investment decision information, help learn and pivot when necessary, and strengthen
the performance of investors’ portfolio and investment strategy;
4. Manage Impact Performance: impact measurement & management is more than counting metrics. It
means considering information about risks, returns, and impact to learn, adjust, and improve investment
decision-making. This is includes embedding feedback loops through the lifecycle of an investment,
incorporating feedback from affected stakeholders, and disclosing impact performance data in a clear,
consistent, and comparable way
© Pablo E. Verra – 2020

5. A Continuous Cycle
4
Although impact measurement is now
fully accepted as a defining feature of
impact investments, the reality is that
defining what to measure and,
subsequently, defining how to collect
the appropriate data are questions
that many impact investors struggle
with. Not having robust or relevant data
points to inform decision-making comes
with the risk of making suboptimal
decisions, limiting chances of success
and, ultimately, impact. Three-quarters
of respondents in the GIIN 2019
Annual Impact Investor Survey view
sophistication of impact
measurement and management
practice as either a significant or
moderate challenge to the growth of
the impact investing industry.
© Pablo E. Verra – 2020
Source: CDC. Impact Measurement: A Practical Guide to Data Collection.

6. A Reminder: The UN’s Sustainable Development Goals
5
UN Sustainable Development Goals 2015 → 17 goals agreed by 135 countries to end poverty, protect the planet
and ensure prosperity for all. Target: 2030.
© Pablo E. Verra – 2020

7. 6 Key Reasons Why Impact Measuring Is Important
6
© Pablo E. Verra – 2020
1. The conversation around impact measurement has evolved in recent years from “accountability”
to “standards” and now to “value”: while accountability and standards – which help facilitate the
comparison of different types of impact – are vital to impact measurement, investors need to gather
this data, analyze it, learn from it and use that knowledge to improve upon impact practices and
create more value for all stakeholders;
2. Impact measurement was previously regarded as an accountability and compliance tool and
now it’s becoming a business tool: investors are increasingly realizing the value that impact
measurement can bring to different departments, from business development and operations to
investor relations and marketing, among others. The top three reasons investors used to be motivated
to conduct IMM were: (i) to better understand the impact, (ii) proactively reporting impact to key
stakeholders, and (iii) to manage and improve their impact. Impact is now seen as having business
value;
3. ESG comes first in impact measurement: there is no impact investing without incorporating ESG.
Potential negative effects of an investment – and there are always effects no matter the type of
investment – must be considered;
4. One of the greatest risks of mobilizing capital to the impact sector is the potential for impact
washing. Impact investors need to be looking behind the curtain on investments to maintain credibility.
There are increasingly examples of investments and funds being marketed as impact
investments without the impact management practices in place to substantiate this label.

8. 6 Key Reasons Why Impact Measuring Is Important (cont’d)
7
© Pablo E. Verra – 2020
5. The four greatest needs in impact measurement at the moment are:
• Collecting, measuring and harmonizing impact data: for instance, IRIS has an estimated 40
indicators just to measure employment, and once you consider the job tier, duration, and
benefits measurement becomes even more complicated;
• Transparency: independent verification, similar to financial auditors, would also add credibility
to the sector;
• Resource efficiency: impact investing is not easy, and can be costly in terms of resources. By
implementing a lean data approach, the sector could benefit from narrowing in on the right
handful of metrics as opposed to a laundry list that is costly to collect and risk diluting the overall
impact. Moreover, building in feedback loops and sharing that data with all stakeholders stands to
benefit the entire value chain as opposed to just the entity collecting the data;
• Data, data, data: more research, case studies, and other publications will work to prove this model
that one can ‘do good while doing well’.
6. The tides are changing: clients are helping to push this conversation forward and creating the
change in products in the market. Faith-based investors, very large banks and private wealth
investors are increasingly exploring impact – “it will take a revolution, but if the younger generation
works to educate people, we can get there”.

9. A Set of Operating Principles for Impact Investing
8
With the goal of standardizing impact classification and measurement, IFC has developed the ‘operating
principles for impact investing’. The principles reflect best practices across a range of public and private
institutions. They integrate impact considerations into all phases of the investment lifecycle: strategy,
origination and structuring, portfolio management, exit, and independent verification. They also call for
annual disclosure that will provide credibility to the market. The principles provide clear a common market
standard for what constitutes an impact investment, helping to mitigate the potential for “impact-washing.”
© Pablo E. Verra – 2020
Source: IFC. Global Launch. Operating Principles for Impact Investing.

10. Recent Signatories: TPG & KKR
9
“KKR and TPG — two of the biggest, with about US$330 billion in total assets between them — have agreed to
report by April on the positive environmental, social and governance impacts of their investments, as well as
their potentially negative effects. Both firms have signed up to a set of principles laid out by the World Bank’s
International Finance Corporation, under which fund managers will have their reports verified by independent
assessors and will need to update information annually”. Financial Times, January 2020
© Pablo E. Verra – 2020
Source: Financial Times.

11. A Short History of Impact Measurement
10
The impact investment sector has actively taken up the challenge of measuring social impact and has come a
long way in the past ten years or so. Many impact investors began by developing their own metrics and tracked
social and environmental performance on spreadsheets. These emergent practices are now beginning to
coalesce into a set of good practices. Several online tools and platforms have been developed to bring increased
consistency to impact measurement and reporting.
© Pablo E. Verra – 2020
ACUMEN Pulse: developed by a set of Google developers, Pulse’s general idea
was to bring reporting and accountability into the impact investment sector,
and to standardize the metrics that social investors track. From around 2006
onwards, the system began to attract wider interest in the sector and
eventually evolved into the PULSE software.
IRIS: the Global Impact Investing Network (GIIN) and several other
foundations, teamed up to develop IRIS – the Impact Reporting and
Investment Standards. IRIS is essentially a catalogue of generally accepted
performance metrics that impact investors can browse and choose from to
describe the social, environmental and financial results of an investment or
fund. Each metric is a presented with a standard definition, an ID for reporting
citation, and usage guidance.
B Labs: B Labs is an organization building on earlier work to help businesses, investors, and institutions measure their social
and environmental impact. The B Impact Assessment draws on IRIS metrics and enables companies and funds to ‘assess,
compare and improve’ their performance through an online self-assessment.

12. Recent Developments in Impact Measurement: IRIS+
11
IRIS+ makes it easier for investors to translate their impact intentions into real impact results. IRIS+ increases
data clarity and comparability, and it provides streamlined, practical, how-to guidance that impact investors
need.
© Pablo E. Verra – 2020
Key Features of IRIS+
• Core Metrics Sets to increase data clarity and comparability. These are backed by
evidence and based on best practices across the industry;
• Thematic taxonomy based on generally accepted Impact Categories and Impact
Themes;
• Updated IRIS Catalog of Metrics, the generally accepted source of standard social
and environmental performance metrics used by leading impact investors;
• Curated resources and practical how-to guidance to support day-to-day impact
measurement implementation;
• Alignment with the UN Sustainable Development Goals (SDGs), including both
SDG Goals and targets;
• Alignment with other major frameworks and conventions, including the five
dimensions of impact and more than 50 metrics frameworks, standards, and
platforms;
• Interoperability with third-party data platforms and systems that use IRIS
metrics.

13. Recent Developments in Impact Measurement: DELTA
12
IDB Invest developed the DELTA Tool (for Development Effectiveness Learning, Tracking and Assessment),
which allows it to standardize how it scores and analyzes different aspects, such as: (i) how well does the
project align with the IDB Group’s development priorities?; (ii) what are the potential economic returns for IDB
Invest and for the client?; (iii) to what extent will the project produce social benefits?; and (iv) how can its
development impact be accurately assessed and verified?
© Pablo E. Verra – 2020
(XSR)
Development Effectiveness Learning,
Tracking and Assessment Tool (DELTA)
ORIGINATION
Strategic
Selectivity
PREPARATION
Financial
Contribution Rate
(FCR)
SUPERVISION
Annual Supervision
Report (ASR)
Innovation testing
COMPLETION
Impact and other
evaluations
1. DELTA is used both as a scoring
system as a checklist during
project preparation;
2. Score operations in terms of
development impact and
additionality;
3. Assess the alignment with
strategic priorities of the IDBG
and IDB Invest;
4. Assess the quality of the design
at entry.

14. 13
The AIMM system seeks to give IFC a more rigorous, evidenced-based, end-to-end approach for achieving its
triple bottom line by: selecting projects that maximize IFC’s development impact, while being socially and
environmentally sustainable; and also meeting IFC's financial performance expectations. AIMM mainstreams
the ex-ante selection of projects based on both their direct project outcomes and systemic market effects -
something that IFC has been applying on ad hoc basis, but now requires for all new projects.
© Pablo E. Verra – 2020
Source: IFC. AIMM General Guidance Note.
Recent Developments in Impact Measurement: AIMM
Source: IFC. AIMM General Guidance Note.
AIMM Framework
AIMM Rating Methodology

15. 14
inFocus has developed a 7-step approach towards impact measurement. I believe that this systematic approach
is a relatively simple and logical way to get you started with impact measurement.
© Pablo E. Verra – 2020
Source: InFocus. 7 Steps to Effective Impact Measurement.
Recent Developments in Impact Measurement: inFocus

16. LET’S KEEP TALKING!
Pablo E.Verra
pablo_verra@hotmail.com