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Despite making great strides in terms of broadening its appeal and implementing its ideas, impact investment is constrained by the lack of a common language to measure its successes and overcome its obstacles, argues Reagan Ronald Ojok, Senior Monitoring and Evaluation Officer at Uganda Development Bank Limited.

Rising Impact Investment and the Need for Harmonization of Measurements

I recently read about the Rockefeller Foundation’s 2007 Bellagio Conference where the term Impact Investments was first coined. This coincided with a planned interview/survey conducted by Impact Investing South Africa (IISA). The Global Impact Investing Network (GIIN) defines impact investing as the investment made with the intention to generate positive, measurable social and environmental impact alongside financial return.  I was further provoked to think critically about this industry, which is not even in its adolescence. The industry has continued to expand globally since the Bellagio Conference with the World Economic Forum consistently lauding impact investing as a vitally important new investment approach with the potential to reconcile some of the key shortcomings in traditional financial markets.

The GIIN estimates that over 1,340 organizations currently manage $502 billion in impact investing assets worldwide, categorized as: endowments, high net-worth individuals, foundations, institutional investors and retail investors that invest capital directly in social enterprise and instruments (UNDP brief).

Regional Share of Assets Under Management

Source: Global Asset Under Management Statista

Unlike the developed world and much of Asia, Africa and the Middle East still offer opportunities for high-return, scalable impact investing. In the face of the global call for Domestic Resource Mobilization (DRM), the 3rd Financing for Development (FfD3) Conference and the Addis-Ababa Action Agenda, it is incumbent upon governments, businesses and investors to creatively and innovatively tackle the sustainable development challenge. Sub-Saharan Africa, in particular, presents vast potential for investment and the impact investment model is especially suited to exploiting these opportunities in a way that mobilises private finance without compromising inclusive structural transformation.  To make sure that this balance is maintained, there is a need for appropriate tracking and measurement of the outcomes of impact investment using a common framework. This shall enable comparability of progress across sectors and regions.

How Impact Investments work?

Impact Investors strive to achieve both demonstrable positive societal outcomes and a financial return, overcoming the binary division of investment for profit and explicitly non-profit financing. It is not limited to a particular sector and can be undertaken by both for-profit, and not-for-profit organizations, so long as there is both an element of financial return and specific social good. UNDP indicates that private equity and private debt are the products most often adopted by impact investors, with the latter taking the largest share in value terms.

Why does it matter?

The entrenched global development challenges of poverty, climate change and inequality require innovative and evolving solutions. The versatility of impact investing lies at the core of these new approaches. According to Pension for Purpose, the growing focus on socially responsible investments, or ethical investing, has prompted several mainstream investments managers to set up impact investment funds. The steady growth in impact investing calls for a combination of social entrepreneurship, venture capital policy reform and government regulation to create markets.  Impact investing has thus far been distinguished by the variety of its sources, inputs and methods and the diversity of its beneficiaries.

Key Success Factors

The success of impact investing depends on key intermediaries that catalyze and link investors with impact driven enterprises. Governments and Development Finance Institutions (DFIs) retain a pivotal role in facilitation. They provide enabling environments in which market transactions produce direct incentives and co-financing.

Registration as a benefit corporation can help address the legal mandate of balancing fiduciary duties between shareholders and stakeholders. It should also be noted that this B-corporation  can be privately certified in addition to its legal registration.

Governments may also assist in benchmarking new initiatives against previously developed environmental, social and governance market indices. This is to identify and track companies that meet certain environmental and social sustainability criteria, with a focus on low carbon businesses.

Impact Measurement Tools

Despite the rapid growth of the sector, harmonization of impact measurement and reporting remains a big challenge. The industry is marred with confusion on what measurement approach to take. Three approaches have so far proved popular: Impact Reporting and Investment Standard (IRIS), Global Impact Investing Rating System (GIIRS) and PULSE.

IRIS sets standard definitions that help firms and investors define their social and environmental performance whereas GIIRS uses the IRIS to measure data against industry benchmark reports as an impact rating tool of social and environmental performance. This is then complimented by PULSE which collects and reports data based on geography, sector or time period to demonstrate exactly where and how the investments are most effective. All the above have a shared and complimentary role.

Reporting Challenges

However, although these approaches have developed, there are significant reporting challenges including:

  • Lack of a common language for reporting impact.
  • Limited cognisance of long-term business value that comes from the pursuit of impact alongside profit.
  • Lack of a standardised method, measures and the numerous competing approaches.
  • Actual returns for wider society are difficult to quantify and communicate.
  • Persistently low levels of integration of impact into investment decisions.

Globally, the appetite for impact investing is growing. Investors are eager to prove that profit isn’t their only objective. Concerned stakeholders should strive to address the above challenges, without which the quest for harmonization of measurements and reporting will remain a mirage. It is therefore important to move this debate from the streets and corridors of conferences to the boardroom. This is a call to action. All concerned parties should recognize that they have a role to play if the above is to be achieved.

Reagan Ronald Ojok is the Senior Monitoring and Evaluation Officer at Uganda Development Bank Limited.  He can be contacted at or

Disclaimer: The opinions expressed in this article are the author’s own and do not necessarily reflect those of the European Evaluation Society.