The Business Value of Impact Measurement
Impact measurement is a hot topic. More and more companies, even the ones that don’t proclaim the impact investor label, are measuring their impact. For many impact investors however, impact measurement is considered an essential aspect of impact investing, as it demonstrates an investor’s commitment to the social and environmental performance of their investments. Yet, apart from quantifying your impact, what other benefits may be derived from impact measurement? Well, the Global Impact Investing Network (GIIN) set to find out, and published their finding in their report ”The Business Value of Impact Measurement” in which they highlighted 5 key findings:
- Revenue growth: Social and environmental data empower impact investors and their portfolio companies to drive revenue growth by understanding customers and developing better products and services.
- Improving operational effectiveness and efficiency: Impact investors use social and environmental performance data to inform and improve a wide range of operational issues, from human resource management to accounting procedures.
- Investment decisions: Many types of impact investors find that they can improve deal sourcing, targeting, and selection when they actively engage in impact measurement.
- Marketing and reputation building: Social and environmental impact data is vital to attracting investors and earning trust with key stakeholders, including communities and local authorities.
- Strategic alignment and risk mitigation: Impact measurement plays a critical role in ensuring that investors’ and companies’ activities are aligned with their missions and strategies. It also helps mitigate risks that relate to both impact and financial concerns.
The report further claims that the benefits of impact investing are becoming increasingly clear to a growing audience, especially now impact and financial data are merged, it can optimize impact performance and strengthen an investors business, according to GIIN CEO Amit Bouri:
“We are seeing an increasing fusion in the use of impact and financial data to make investments that not only optimize impact performance, but also help strengthen an investor’s business,”
“Investors are continuing to find synergies between the social, environmental, and financial aspects of their work, and they are applying these insights in ways that generate significant value for the investor, their investee companies, the beneficiary communities, and the environment.”
Impact measurement is also no longer seen as a mere cost center as investors are seeing the real business benefits from their impact measurement data, according to Director of Research for the GIIN, Abhilash Mudaliar:
“The practice of impact measurement is a core characteristic of impact investing,” “However, it is not just a cost center. As this research demonstrates, many investors are gaining real business benefits from their impact measurement data by using it to inform strategy and to find ways to optimize performance and advance strategic goals.”
According to Kelly McCarthy, Senior Manager of Impact Measurement, impact measurement is now also seen as a useful strategic management tool as:
“An impact measurement strategy is most beneficial to the investor when it moves beyond counting outputs and is used to inform investment decisions and portfolio management,” “We are witnessing a growing acknowledgement in the impact investing community that impact measurement and management is an incredibly useful strategic management tool.”