Beyond Numbers: measuring investment impact


According to the Global Impact Investing Network (GIIN), impact investing can be defined as “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.”

Notice the word “measurable.” Impact investing would not be successful without proper measurement system to inform investors and other stakeholders. For small and medium enterprises (SMEs) this entails gathering environmental, social and governance (ESG) data from the business operations and tracking the progress during the life of the investment. Businesses report financial data to investors and the ESG reporting serve as added accountability on impact achieved. Additionally, measuring ESG data helps track progress towards the Sustainable Development Goals (SDGs).

Business owners are realising the importance of being transparent about their suppliers, manufacturers, and overall carbon footprint. Collecting impact data also has a business value. Impact data, for instance, can drive business growth; when a company has a better understanding of its customers, then products and services can be improved, driving revenue up. By communicating impact data through marketing and branding, a company can gain more traction amongst users.

There is no “right” way to conduct impact measurement when it comes to investments. Measuring impact depends heavily on the business, the impact theme (i.e. environment vs. gender, etc.) and the interests of the investor. There are a wealth of resources that can assist in developing impact measurement frameworks and indicators, such as IFC, IRIS, IMP, to name a few. By borrowing from existing practices, the impact measurement community can share their learnings and adapt new strategies for improvement.

A MEDA Case Study:

For over 60 years, MEDA (Mennonite Economic Development Associates) has been involved with impact investing. In fact, MEDA’s first project was an investment in a dairy farm in Paraguay. MEDA firmly believes that impact can be achieved through private sector solutions that begin at the business fund manager and ecosystem level.

MEDA’s INFRONT project (in partnership with Sarona Asset Management and the MaRS Centre for Impact Investing) was designed to tackle SME challenges, not just through investments, but also with targeted technical assistance to ensure the SME is not creating unintended negative impact and that communities can be positively impacted beyond financial returns. For MEDA, this meant assisting SMEs with building an enhanced monitoring and evaluation system (EMES).


MEDA conducted an extensive review of industry metrics to develop a set of indicators appropriate for INFRONT. This process proved to be a substantial mission but was also two-fold; after a piloted set of indicators was established, they will be implemented in all MEDA’s investee companies.

For the investment component of the project, 33 non-financial indicators (all IRIS compliant) were chosen for INFRONT after an extensive review. These were collected from SMEs on annual basis. When Sarona was tasked to collect this data, many SMEs expressed the non-financial data was too difficult to obtain and that it did not line up with what their other investors were asking from them. Therefore, enthusiasm was low, and much of the non-financial data collected was either incomplete or inaccurate. To lessen the burden on the SMEs, Sarona cut this list down to 22 indicators. These indicators provide project partners with a high-level snapshot on how the SME is performing in terms of ESG standards. In consultation with industry experts MEDA developed a uniform set of KPIs for companies receiving the Sustainability Innovation Grant (SIG). These KPIs addressed different ESG concerns, including environmental sustainability, local economic development, poverty, and gender.

Through INFRONT, MEDA has learned the importance of evaluating ESG standards within companies. Thanks to the impact measurement system implemented through INFRONT and Sarona’s non-financial indicators, MEDA is able to build a business case between socially conscious companies and financial return. For example, the 22 non-financial indicators have shown that Sarona’s “female friendly” companies (ones that had a strong female to male ratio of board representation) often had a stronger financial performance over a two-year timeframe. We also learned that the impact measurement system should not be onerous and complicated for the SMEs as they have limited capacity and resources to gather data and communicate results. Reporting on ESG standards, alongside financial data is crucial to highlight the win-win benefits of impact investing. Although not always easy, this is important if we want to support SMEs operating in the developing world and create sustainable, global ecosystems.



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