• Chance Calpas

Impact Measurement

Criteria and Constraints

Impact investing differs from traditional, straightforward financial investments, in that it has the additional goal of effecting positive human impact, on top of being profitable. Although financial profitability is extremely easy to measure since it has a one-dimensional metric, this same ease does not apply to human impact, which is usually varied, intangible, and quantitatively elusive.

The first consideration in impact measurement practice is the choice between measuring positive impact alone, or measuring net impact, which is the difference between the positive and negative impact. As might be predicted given the varied nature of the different areas of imtwixpacts, very few of the respondents surveyed in Global Impact Investing Network (GIIN) study measured negative and/or net impact. The difficulty involved in calculating the result of an equation where the various components are completely incongruous is predictably insurmountable. It is impossible, for example, to decide whether the weight of environmental impact is greater than that of employment, and vice versa.

As for the investment’s human impact itself, there are various ways of measuring its extent. It could be measured in terms of:

  • its output, such as in the good produced or the service delivered;

  • in terms of its output’s impact, such as in the increase in access to healthcare effected by the investment;

  • and in terms of its breath and depth, which is the area covered by, and significance of the impact respectively.

Lastly, there are additional concerns over the longevity of the impact, which is of course an important component of an investment’s impact, as well as considerations over the legitimacy of the human impact generated, which is particularly difficult to measure.

The Many Different Metrics

Given the uncountable number of ways in which impact can be measured, certain organizations have developed metrics for the measurement of social and environmental impact. Both, however, may be united under the banner of human impact, as any impact on the environment ultimately only has its significance in its meaning for human beings (high temperatures make the planet inhospitable for us, freak weather catastrophes destroy our homes, etc.). In addition, there are certain projects that simultaneously qualify as having both an environmental and social impact (providing sources of sustainable energy to communities that do not have access to traditional sources of energy is one such example.

Originally a collaborative effort between the Rockefeller Foundation, Acumen, and B Lab, but currently under the stewardship of GIIN, the IRIS is a metric that help organizations define and evaluate in a standardised manner:

  • the objective of their investment project,

  • its beneficiaries,

  • its theory of change (the mechanism by which the impact is brought about, or the causal sequence that would bring about the planned impact),

  • its impact targets (the specified and verifiable degree of the specific impact it plans to accomplish—amount of potable water produced during a certain period, etc.),

  • as well as a host of organizational metrics that measure both the financial aspects of the firm and project in question, as well as the sustainability of its operations.

The IRIS metrics provide guidelines for the organizations to report on their projects, creating a set standard by which the impact of the wide variety of projects of different companies may be measured. The usage of a shared metric by disparate firms allow for a quantitative comparison between them that would not have otherwise been possible, had they each selected the figures to report on a subjective basis and each done so in their own way. The IRIS, however, is not the only catalogue of metrics available for organizations to utilise; B Analytics, the UN Sustainable Development Goals, and the Principles for Responsible Investment (PRI) are other prominent examples of metrics and frameworks that companies could utilise and align their work towards.

  • B Analytics, managed by the NGO B Lab, is a platform that compiles data on different companies, both in the internal realm of corporate management, and external realm of the company’s impact. B Impact Assessment, from which the compiled data is sourced, also provides resources for companies to improve on their impact performance.

  • The UN’s roughly 30 sustainable development goals (no poverty, climate action, zero hunger, etc.) highlight the major themes of impact evaluation, and can be fitted under Earth Capital’s impact measurement scorecard, Earth Dividend’s five broad categories (Pollution, Social & Economic contribution, Society & Governance, Ecosystem Services, Natural Resources), which can be further reduced to the usual two categories of environmental and social impact.

  • The PRI is a framework that seeks to persuade traditional investors to consider environmental, social, and corporate governance in their investment decisions.


There are a multitude of difficulties involved with measuring human impact, which eludes all attempts at quantification and delineation, and which very often has ramifications far removed from the origin (the exact impact of providing access to energy to a community obviously extends well beyond the immediate uses of this energy; it would almost certainly have a fundamental impact upon the decisions and possibilities of its inhabitants, resulting in an elongated and profound impact on the community’s future). Human impact can be seen, even, as an extension of the traditional financial metric where an investment’s feasibility is judged - it utilises the same positive and net outcome criteria, but extends this usage further to non-traditional areas. The entire range of the specific types of impact that a project can have ultimately have their significance within their meaning for human beings, and the movement toward embracing new criteria in investment evaluation is, to a certain extent, a much-needed extension of the age-old concept of economic rationality over more than just the very narrow area of financial profitability. Since the positive externalities of human impact do not in any way translate into financial profits for investors—which is as of now still the only real motivator for investment, seeing as how most organizations tend to justify the pursuit of sustainability or impactful projects as being ‘no worse’ than traditional projects in terms of profitability—the lack of incentive will remain an impediment toward a more utilitarianist market, where human impact may be seen as an equally valid criteria in investment evaluation, rather than the status of a tagged-on freebie that it currently possesses.

At the end of the day, the ultimate impact of any investment cannot be measured. Figures such as GDP can be measured, and can serve as a proxy for well-being and happiness, but in the end it captures only one aspect of well-being, the prioritization of which in itself requires justification (are we to prioritize present well-being over technological progress, i.e. future well-being, for example, and if so, why and to what extent?). The further development and refinement of different metrics can lead towards a more extensive and detailed quantification of the different aspects of value, but it ultimately rests upon us to decide what it means to us, and what we are to do in the face of it.

By: Chance Calpas