Three best practices for companies
1. Be transparent about your impact data.
Investors place a high value on understanding your impact data and its underlying assumptions as it feeds into their own impact reporting. Investors consider the greatest challenge to the impact investing industry’s development to be the ability to compare impact results to peers. In a recent survey, 87% of investors indicated that comparing impact is a challenge to at least some degree and 28% noted that it is a significant challenge.4 Transparency not only strengthens your company’s credibility, but also ensures that investors can confidently interpret and compare your results and report to their stakeholders.
Illustration: Impact reports often present standalone impact metrics, such as the number of patients served in a certain year. While useful, this data can be difficult to interpret without context, as a single number says little about progress or relative performance. Adding context, such as a time series of data or an industry comparison, can add significant value to your impact data. Additionally, including the calculation methodology for your data points, especially for complicated ones such as greenhouse gas emissions avoided, can strengthen your impact credibility. Context enables investors to analyse impact effectively and report credibly to their stakeholders. A helpful tool for understanding what kind of impact information investors are looking for is the Impact Management Project’s Five Dimensions of Impact, an industry-recognised framework for understanding impact on the planet and people.5
2. Be open with your investors if your impact journey is not going as expected.
Impact investors understand that issues may arise, and impact targets may sometimes not be met because they are also working through impact measurement challenges. To advance the space and continue to stimulate the flow of capital in the field, reliable, transparent, and complete impact information is needed from every participant. Investors are your partners on this journey and honesty is critical.
Illustration: For early-stage companies, finding the most effective way to quantify their impact can be a winding road. New or better data may emerge that allows the company to improve its impact measurement. Conversely, a business may find that its impact calculation, originally thought to be more accurate, is not scalable, so it may revert to a simpler calculation used earlier. Investors often support evolutions in approaches to impact measurement, if supported by a robust evidence base.
3. Seek impact advice from your investors whenever needed.
Impact investors are often willing to share their industry expertise and networks to support you in measuring your impact. Brainstorming alongside your investors (rather than feeling you have to come up with all the answers yourself) can often yield innovative results.
Illustration: Portfolio companies frequently ask us for advice on impact-related topics. Recently, we advised a software company playing a key role in the energy transition on the most effective ways to measure its impact. We also provided feedback to a company operating in the solar sector on its debut sustainability report. In fixed income investing, recommendations on sustainability practices and deal structuring have formed a part of our engagement during premarketing of sustainable debt offerings. Our sustainability teams (encompassing both ESG and IMM) have deep experience in both the public and private markets and are happy to offer guidance tailored to our portfolio companies’ businesses, at every stage of their growth and impact journeys.