• Dean Alborough, Head of ESG

How to measure the “Impact” in Impact Investing

Private markets are seen as fertile ground to more directly achieve positive impact, given an investors engagement at boards and subcommittees. With the speed at which impact investing is evolving, it is prudent to self-reflect on one’s own impact management practices and test the integrity of your approach.

Who would have thought that the investment profession would become one of the leading actors of global sustainability? Many now hold the view that managers of capital in fact have a moral duty, given their role, to drive forward the sustainability agenda. Ten years ago, as a consultant I certainly would not have predicted the role asset management now plays in the drive for global sustainability. Yet here we are, with impact investing showing signs of only gaining further momentum. And so, demonstrating your impact (positive contribution) is more and more a requirement to do business.

Old Mutual Alternative Investments (OMAI) is one of the largest alternative investment managers in Africa, with over R58 billion (US$4 billion)[1] under management in infrastructure assets, private equity and impact funding. Our commitment to responsible investment is central to OMAI’s investment objectives and to fulfilling our fiduciary duties towards our shareholders and beneficiaries. We believe that embedding environmental, social and governance (ESG) thinking into our investment decision-making is critical if we want to create positive futures and sustainable, superior, risk-adjusted returns for our clients. OMAI has therefore adopted an ESG and Impact Management Framework to achieve its vision of continual improvement in ESG performance and unlocking positive impact outcomes.


Impact investing can be viewed as a subset of good ESG practice. The International Finance Corporation (IFC) recently defined impact investing as ‘investments made in companies or organisations with the intent to contribute measurable positive social or environmental impact, alongside a financial return’[2]. There are four key elements that an impact investment must have, according to commonly adopted definitions – intent, positive impact contribution, measurement thereof and financial return.

ESG (sustainability) practice in the financial services historically focused on negative impacts risk mitigation (focus of ‘do no harm’). A growing realisation dawned globally that if we continue to incur negative impacts, even if minimised, a downward trend in environmental and social health inevitably results. In 2015 the United Nations Sustainable Development Goals (SDGs) were then established, providing governments and the private sector to contribute towards the overall goals, creating not only a focus on the risk management of negative impacts, but an equal focus on the creation of positive impacts and their contribution towards meeting the major challenges facing our world. A global shift led to an idea of “net positive outcome”. However, the adage “you cannot manage what you don’t measure” holds just as true in the ESG and impact investing practice.

Investments that claim to result in positive outcomes require credible, robust measurement to evidence such impact. Robust positive impact measurement allows for the following:

1. Defensible evidence of your positive impact.

2. A deeper understanding of how positive impacts are being created.

3. An analysis to determine if the positive impact is what you intended.

4. Just as important, an indication if efforts are not resulting in the intended positive impact. In which case management decisions should be made to adjust your activities.

Unfortunately, for good reason, there is a growing concern in the impact investing world of what is called ‘impact washing’, where investors falsely claim the achievement of positive impacts. To guard against this, investors should adopt a robust defensible impact measurement and management approach.


The practice of measuring impact has been around for decades in the environmental and social industry, primarily in impact assessment practices. Much can be gained from analysing these applications. More recently the Global Impact Investing Network (GIIN)[3] has published documents on impact measurement, and the Impact Management Project[4] has provided a framework of the elements that can be considered when measuring impact. In a recent publication, the IFC has identified three dominant approaches adopted for impact ‘measurement’. These include:

1. Actual measurement of defined metrics against a target/goal (Impact target archetype)

2. A qualitative assessment of the significance of the impact (Impact rating archetype)

3. A quantitative calculation of the degree of impact (Impact monetisation archetype).

It is critical to identify that there is a difference between ‘measurement’ and ‘rating’, and that these are not mutually exclusive. It is possible to undertake impact rating in a very subjective manner with little to no real measurement, highlighting a risk of the rating archetype. Approaches 1 and 3 above require actual measurement of impact.


OMAI’s primary approach is the impact target archetype. This is the identification of goals with associated targets. Measurement of relevant metrics is undertaken to assess progress or lack thereof against these targets.

The key reasons why OMAI has adopted this as our primary approach is the following:

1. OMAI has always held the position that any claimed positive impact must be based on credible, defensible evidence.

2. Only by measuring your impact at ground level can you manage it.

3. While an impact rating approach could be overlaid, it needs to be based on actual ground level measurement in any event.

4. The impact monetisation approach, while powerful in result, is an expensive and time consuming methodology. OMAI utilises this approach in certain ad hoc contexts where it makes sense, and is complementary to the primary impact measurement approach.

Impact investors should reflect on why they may choose a certain approach, and implement an impact measurement system.

The SDGs are a set of 17 goals which act as a successor to the Millennium Development Goals. These goals were adopted at the Sustainable Development Summit on 25- 27 September 2015 in New York, and are now considered the primary global benchmark for institutions seeking to achieve sustainable development in their business, activities and investments. OMAI uses the SDGs as topline objectives, identifying those global goals which we believe we are most likely able to influence in terms of outcomes across our broad portfolio and those that are relevant within our context.

OMAI implements an environmental and social management system (ESMS) as a robust approach to embedding ESG requirements across its fund portfolios, including a positive impact management framework. The ESMS fully integrates ESG into the OMAI investment lifecycle.