n the realm of sustainable investing, impact investing frameworks guide investors in generating intentional social or environmental impact alongside financial returns. Standardized reporting frameworks help impact investors align themselves with industry best practices and stakeholder expectations, particularly in tying the measurable output and outcomes of their work to the bottom line. But the true value of capturing impact metrics goes far beyond reporting, which is only the first step. The more important step is what you choose to do with that information. How will you leverage those insights to further weave together both purpose and profit?

In this article, we will:

• explore the distinction between various impact reporting frameworks,
• delve into their examples, 
• discuss their benefits, and 
• highlight the importance of a comprehensive approach beyond reporting.

Introduction to impact investing frameworks

Impact investing frameworks provide a structured approach to generate measurable positive impact alongside investment returns. These frameworks guide investors in aligning their investments with specific impact themes or sectors, focusing on intentional and quantifiable outcomes.

Examples of notable impact investing frameworks

Impact Management Project (IMP)

The Impact Management Project (IMP) offers a comprehensive framework for assessing and managing impact across the investment process. It provides guidance on defining impact objectives, setting impact targets, and measuring impact performance. IMP helps private equity investors integrate impact considerations into their investment strategies and decision-making.

Best suited for: Enterprises and investors who need consistent and coherent guidelines on how to measure, report, compare and improve performance.

Global Impact Investing Network (GIIN)

The Global Impact Investing Network (GIIN) is a leading organization in the impact investing space. It offers various resources and frameworks for impact investors, including the IRIS+ system for impact measurement and management. IRIS+ provides standardized metrics and indicators to assess the social, environmental, and financial performance of impact investments.

Best suited for: Impact-focused entities such as impact investors, impact funds / asset managers, social enterprises and non-profits, DFIs (development finance institutions), foundations / philanthropic organizations. 

United Nations Sustainable Development Goals (SDGs)

The United Nations Sustainable Development Goals (SDGs) serve as a widely recognized framework for addressing global social and environmental challenges. Private equity investors can align their investments with specific SDGs, leveraging these goals as a guide to generate positive impact. The SDGs provide a common language and framework for investors to measure and communicate their impact contributions.

Best suited for: Organizations and investors who want to align their activities and measure/report their contributions to the 17 Sustainable Development Goals established by the United Nations.

Benefits of using impact investing frameworks

Impact investing frameworks are particularly valuable when private equity investors aim to target investments towards specific impact themes or sectors. They’re a valuable tool for sharing the quantifiable outcomes generated by the investments, which in turn reinforce transparency and proof of impact. 

• Guidance on impact measurement and management: Impact investing frameworks offer more structure and clearer parameters to work with when assessing impact outcomes. They’re useful standards within which firms can direct their capital in areas where they can make a meaningful difference, e.g., renewable energy, healthcare, or education. These frameworks offer methodologies, tools, and metrics to track and evaluate impact performance.

• Better impact reporting and communication: Private equity investors can use impact reporting frameworks as a more standardized way of communicating their investment outcomes. These frameworks establish a common language and methodology for impact reporting, building trust and enabling meaningful dialogue with investors, portfolio companies, and other stakeholders. They help paint a clear picture of the fund’s impact narrative and progress over time. 

• Unlocking new sources of capital: Another benefit of reporting into a standardized framework is the ability to attract and retain socially conscious investors. It serves as a way for private equity firms to provide transparent and credible evidence of their impact performance to potential investors. This can instill confidence in investors, demonstrating that the firm is committed to delivering tangible positive outcomes through their investment strategy. 

As impact investing continues to gain prominence, robust reporting frameworks will prove to be a valuable tool for measuring and managing capital, attracting capital from impact-focused investors and fostering long-term partnerships based on shared values.

Focus on the story behind the numbers. 

Impact reporting isn’t just about capturing metrics. Done well, firms have the power to tell the comprehensive story of their organization's sustainability and impact journey. While data and metrics provide important quantitative insights, they only paint part of the picture. Remember to pay attention to the qualitative aspects as well. Highlight the strategies, initiatives, and progress made in areas such as environmental stewardship and social responsibility. Capture the efforts taken by funds and portfolio companies. How did that translate into real-world outcomes? How many lives—employees, consumers, or otherwise—were changed, for better or for worse? How did these decisions impact the health of the planet and the wellbeing of our communities? Who did it touch? 

By focusing on the story behind the numbers, impact reporting brings transparency and authenticity to the forefront. It allows stakeholders to understand the context, motivations, and aspirations driving investors’ practices. It helps people appreciate the values and commitments of the organizations they engage with and fosters a deeper understanding of the broader impact created beyond financial returns. 

A quick recap

The most agile private equity investors understand the significance of adopting relevant frameworks and embracing a comprehensive approach. Reporting frameworks provide advantages like standardization and transparency, but they are not a universal remedy. It’s important to take a holistic lens that integrates impact considerations alongside investment decisions. Ultimately, going beyond impact reporting humanizes the investment process by highlighting an entity’s North Star, as well as the positive ripple effects it leaves in pursuit of a more equitable world.

P.S. Learn how our subject matter experts here at Tablecloth can help you accelerate your impact investing strategy:

• Investors Want Proof of ESG Impact. Here’s How Tablecloth Helps You Get There.
• How To Incorporate ESG Into Investor Due Diligence

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