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Impact Measurement

Ever since Impact Investing has made it to the forefront of debate on alternative investment approaches impact metrics have played a vital role. 

If it is true that the main difference between traditional finance and impact investing is in the conscious consideration of an investment’s environmental and social impact then making this very impact tangible and transparent in the process is a core criterion in defining the social impact space.

Many approaches to measure and communicate social impact have been considered in the recent debate, ranging from standardised impact key performance indicators (e.g. the IRIS framework) to standardisation efforts through monetisation of social impact dimensions (e.g. the SROI approach).

Recent research and expert opinions however direct the debate increasingly away from the idea of a one-fits-it-all impact metrics approach towards a consensus on the quality of the process that needs to be run through by enterprises when defining their social and environmental impact objectives and measuring their performance against these goals: rather than looking at impact objectives that pretend a false comparability in absence of relevant knowledge on the context in which they are applied, actors along the impact investing chain appear to attach increasing importance to the tangible link between the impact activity of an enterprise and the metrics used for reporting on its performance. Stakeholder analysis, theory of change and the focus on holistic impact measurement rather than the superficial reporting on output indicators are gaining ground as demonstrated in the most recent publications of the EC expert working group GECES on impact metrics and the publication of the EVPA on impact measurement. 

 

The relevance of the Working Group for Luxembourg

For Luxembourg, the market debate on impact metrics is of vital importance given its ambitions to establish new frameworks in support of the social investment sector. As an example, the project of the Société d’Impact Societal, which relies on the co-existence of impact-focused non-for-profit investors and for-profit investors within the shareholder constituencies of the same enterprise depends on reliable social performance indicators in order to be operational. 

Concrete objectives of the Working Group

For reasons evidenced above, Luxembourg based stakeholders and the European Impact Investing Luxembourg are active contributors to the debate on impact metrics and an emerging market consensus. European Impact Investing Luxembourg's members are engaged in expert working groups at EU level and are entertaining a proactive exchange on impact metrics and their practical application to maintain Luxembourg’s initiatives in the impact investing space in tune with the most recent market development. For further information see the literature selection below and follow European Impact Investing Luxembourg’s blog. 

References

A possible operational framework for impact metrics for the anticipated regime of a Société d’Impact Sociétal, provided in an advisory assignment by the UK consulting firm Bates Wells Braithwaite

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Société d'Impact Sociétal (SIS)

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Luxembourg Impact Investing Platform (LIIP)

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Foundations

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Crowdfunding

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Social Impact Bonds

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Climate finance

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