Once a suitable impact investing product has been selected, it is important for investors to figure out whether they are able to assess and report upon the impact achieved. This requires a thorough and rigorous methodology, which validates the investment approach and offers transparency and accountability to stakeholders across the board.
Measuring the impact is key to demonstrate the positive change that has been achieved. Currently, there are a number of different approaches and methodologies used in order to understand how impact is generated and whether impact objectives are achieved. The impact investing industry is heading towards more standardisation with the goal of having one reference point against which the impact management systems of funds and institutions can be assessed. These activities are spearheaded by the IFC-led Operating Principles for Impact Management (the Principles). The Principles draw on best practices from a range of impact asset managers, asset owners, asset allocators, and development finance institutions. They are designed to be fit for purpose for a range of institutions and funds and can be adopted at different levels. Three key pillars lie at the core of these Principles: