How investors’ growing focus on reliable impact measurement is propelling the industry to greater accountability and transparency
by Paige Chapel
I read with great interest new survey findings published by the Rockefeller Foundation that explore the attitudes of retail investors and their advisors about impact investing. With institutional impact investing gaining ground, understanding the imperatives that drive individual investor decision-making will be critical to the continued growth of the field.
Looking through the findings, I was struck by one important observation: despite the growing appetite for impact investing, one of the barriers to greater adoption is the lack of standards and tools to support measuring the ‘impact’ of investments.
In the survey, eight out of 10 retail investors said they find it difficult or extremely difficult to measure impact. Similarly, roughly a third of the advisor respondents said the industry’s approach to measuring impact is unclear and that the lack of a consensus on impact measurement is hampering growth. The Rockefeller Foundation’s report highlights some of the important industry initiatives underway to address the impact measurement shortfall, suggesting that the industry recognizes it must respond to investors’ needs.
Having spent a decade-and-a-half focusing on impact management assessment, initially for CDFIs and more recently for other types of impact asset managers, Aeris has developed a good sense for what resonates with end investors and makes them confident their capital is making a positive difference.
One of the key takeaways from that experience is the critical importance of demonstrating and reporting quantifiable impact results. So, for example, while it’s good to be able to say that you invested in a company that educates at-risk kids, or builds housing for the poor, or manufactures solar panels, we know that it’s much more powerful to be able to report on, say, the number of students that excelled, or housing units built that were affordable to low- or moderate-income families, or kilowatt hours generated by the solar panel maker’s products.
But collecting, aggregating and reporting this kind of “downstream” data from dozens of portfolio holdings is big a challenge for fund managers. Aeris is addressing this challenge by extending and opening our data collection and management platform to managers of impact assets.
Our platform was launched in 2013 to make our own operations more efficient. We took laborious, manual data collection processes that were historically accomplished through a combination of emails and spreadsheets, centralized them in a web-based application, streamlined how financial and impact metrics and narrative documents are collected, and created sophisticated reporting functionality tied to standardized data—including longitudinal analysis and peer group comparison.
We have now added functionalities to the platform, launching a new service called the “Aeris Atlas” that enables impact investment managers to track their own portfolios and to collect and report the kind of impact and financial performance data that their present and prospective investors want to see.
However, in emphasizing the criticality of quantifiable impact results, it is important to point out that the credibility of impact measurement is directly related to the fund manager’s commitment and capacity to deliver such impact. This encompasses a strong alignment of investments to its impact investing theme, and policies, processes, practices as well as leadership commitment and oversight of impact measurement.
Aeris’ core purpose is to guide capital to good. To accelerate the growth of the impact investing field, we provide tools that support asset managers in both measuring impact and strengthening the policies and practices that govern how they achieve promised impact.