This article seeks to provide an overview of the different tools available to impact investors when building an impact management system. They could fall into five categories – objectives, standards, certifications, methodologies and metrics – and come into play at different stages of the impact management process. Ultimately, each investor must decide which combination, and what degree of customization, is appropriate for their impact strategy.
As impact investing gathers pace, investors are refining their approach from an early emphasis on impact measurement – the practice of quantifying impact outputs and outcomes – to focus on impact management. The latter approach integrates impact considerations into each stage of the investment process, from setting investment goals and conducting due diligence, to portfolio management and reporting. It aims to understand impact more fully and improve social and environmental performance throughout the lifetime of an asset.
There are now various tools to manage for impact with increasing rigor and confidence. However, no unified best practice has yet emerged, and the proliferation of methodologies and metrics can be confusing.
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