Last week in London, lawyers from Debevoise & Plimpton co-hosted a BVCA roundtable on impact investing. To most people around the table, impact investing (as opposed to responsible investing) implies that achieving positive social or environmental outcomes is a primary driver of any investment decision, even if financial return is also an important (perhaps equally important) objective. Clearly, therefore, measuring and reporting on impact takes centre stage and – as our discussion last week confirmed – that is not a straightforward exercise.

Of course, impact measurement has been a hot topic for some time. But, even though some important initiatives have borne considerable fruit, there is still some way to go. That was (at least in part) the conclusion of a report released last month by the Impact Management Project (IMP) and the Global Impact Investing Network (GIIN), following a pilot programme that ran between October 2017 and March 2018. The goal of the pilot was to assess the IMP’s impact management convention by testing templates and gathering feedback on the practical application of the convention on sample investment portfolios. One of the key takeaways was that there is an ongoing challenge in measuring impact and understanding how performance relates to impact goals. The pilot programme’s report suggests that the next phase of the IMP should address this issue, in part through the introduction of a template “impact statement” for managers to use to assess data they have collected against the impact goals they have set.

In addition to its work on the IMP, the GIIN has also been instrumental in the development of impact measurement metrics through its creation of the Impact Reporting and Investment Standards (IRIS). IRIS was developed almost a decade ago in a joint project with the Rockefeller Foundation, Acumen, B Lab, Hitachi, Deloitte, and PricewaterhouseCoopers. According to the GIIN’s most recent annual impact investor survey, 57% of survey respondents use IRIS-aligned metrics to measure impact, making IRIS the most widely-used reporting metric by a significant margin.

There are now over 500 generally accepted IRIS performance metrics that are available in the form of a catalogue – managers browse through the catalogue and select the most appropriate IRIS metrics for their product and type of portfolio investments. Certain IRIS metrics are generally applicable across all industries (such as those that track financial performance, similar to those used by traditional managers), while others measure certain social and environmental data points. In addition to the publicly available catalogue, the GIIN has a database that contains examples of dozens of managers’ selected IRIS criteria and multiple guides for its implementation.

Alongside IRIS, impact managers commonly use the Global Impact Investing Rating System (GIIRS). GIIRS uses B Impact Assessment (created by B Lab, the creator of the B corporation certification for “beneficial” for-profit organisations in the U.S.) to provide independent ratings (similar to a Moody’s or S&P credit rating) of social and environmental impact, but not financial performance. IRIS metrics, in addition to other criteria, are incorporated as part of the B Impact Assessment, which ultimately enables managers to benchmark impact performance against a library of thousands of companies and a number of funds.

Finally, it is important to note that, although impact measurement methodology like IRIS and GIIRS continues to evolve and become more popular, most impact investors use a combination of performance tools to develop an impact measurement and reporting system tailored to their investment goals and strategies, which further highlights the importance of initiatives like the IMP and the GIIN’s resources related to IRIS for sharing best practices and increasing the level of sophistication of impact measurement methodology. At our breakfast discussion, the consensus was that the most important criteria in a measurement metric is relevance, and that means that different investments will need to use different KPIs. Comparability across investments is harder to achieve, and should not be at the expense of relevance.

Overall, it is clear that a proliferation of metrics will continue to coexist for some time. That is probably healthy, and the continued development of better and more sophisticated measurement and benchmarking tools would seem to be an important success factor for the impact investing community.