The need for better impact measurement

The World Economic Forum (WEF) turned its attention to impact measurement last week in an article entitled, Impact investment's open secret is spotty data. Better measurement can change that.

The article reports that impact investing has now surpassed $1.1 trillion in assets under management, and goes on to describe it as being 'distinct from ESG (environmental, social and governance) investing, philanthropy or corporate social responsibility (CSR)', which is certainly true. But the article goes on to state that impact investing is 'populated by family offices, high-net-worth individuals and specialized firms like Zurich-based responsAbility Investments, as well as industry giants like Goldman Sachs and Allianz', a list which omits increasingly active market participants: faith-based organisations!

In the FaithInvest Quarterly Forum in September, The FCI Journey into Impact, we addressed the process and paths by which faith-based asset owning institutions are becoming active in impact investing, with wonderful contributions from faith-based practitioners who are doing this now. A review of the Forum can be found here.

Nonetheless, the WEF article makes the very sound argument that the methods used to measure impact investing remain imperfect, and provides some suggestions for improvements in tracking. Specifically, the WEF cites some immediate measures that asset managers can implement to track impact, as well as longer-term measures that would require more fundamental changes in managerial practices:

1. Integrate qualitative insights with quantitative data – Measurement is often reduced to numerical indicators, but biodiversity protection, social impact and behavioural change cannot be fully captured through metrics alone. Contextual narratives and stakeholder insights provide essential depth.

2. Hire experts beyond finance and compliance – Many firms struggle with impact measurement because it is handled by finance or accounting teams that lack subject-matter expertise. Hiring professionals with degrees in biology, psychology and policy analysis can improve the accuracy and relevance of assessments.

3. Normalize transparency about failure – Companies often tend to focus on showcasing success, but this prevents meaningful improvement. Reporting failures and unexpected outcomes helps refine strategy and ensures that future investments learn from past setbacks rather than repeat them.

4. Strengthen cross-industry learning – During COVID-19, managers seemed particularly keen to talk openly. But they revealed that while the challenges their companies encountered in measuring impact were acknowledged internally, these insights were rarely shared beyond their firms. More transparency, especially about failures, could help elevate measurement standards collectively across entire industries.

Certainly, the ability to track and report on impact investing is of utmost important to faith-based asset owners relying on asset managers for implementation of their investment programs. But is incumbent on the faith-based asset owners themselves to demand such reporting and hold managers accountable through regular reviews, becoming fluent in the relevant investment vocabulary by accessing resources such as the GIIN's Faith-based Investing Repository and educational programmes such as FaithInvest's Faithful Finance course, which we will be offering again this winter.

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