Navigating the Impact Maze: Embracing the Messiness

Metrics. Standards. Frameworks. SDGs. Ask anyone how to measure impact and you are sure to be directed into an alphabet soup: IRIS+, PRI, TCFD, GRI, B Lab, GRI, and so on. It is also this soup that I found myself swimming in as the semester started. As someone who previously defined the theories of change and impact frameworks for multilateral organizations and large-scale social impact programs, I was excited. The familiarity with the details however can be an intimidating and daunting exercise.

In our world of impact investing this semester, questions about measuring impact seem like hidden treasures waiting to be uncovered. Our client, a prominent asset management firm, wants to communicate the impact of their engagement primarily to their stakeholders. Over three decades, they have been champions of shareholder activism and engagement, and they believe in being "better owners". For a while now, they have been conveying a clear message to companies, investors, and policymakers: our shareholders expect more from their investments. To drive this change, they employ a variety of engagement tools, including direct dialogues with companies, the submission of shareholder proposals for consideration at annual shareholder meetings, principled proxy voting, and advocacy on public policy matters. What is the impact of these engagements and how do we make sense of such an impact? One might argue that in a general sense, ‘impact’ encompasses both tangible and intangible contributions that lead to better outcomes for both people and the planet. Over the last few years, there have been multiple efforts to standardize the definition, measurement, and valuation of positive and negative impacts of companies.

Our client is a pioneer in engaging with stakeholders, public policy and companies to make them better. But how do you even quantify that? Do you only count the number of written engagements, or events hosted? It's a headscratcher. Another head-scratcher was their diverse engagement strategies. Sometimes they go solo, other times they partner up with non-investor groups or collaborate with other big players. We need to understand their unique role and measure their impact in this dynamic mix. They work across sectors such as workers’ rights, climate change, racial justice. We will need to standardize such impact at a broad level. Lastly, most impact metrics are built for private investments and allocation, not for engagement work like our client’s.

Adapting these metrics for public equity engagement is like fitting a square peg into a round hole. However, at the crux of this is our client’s clarity on its approach to impact investing. In January 2023, they made a case that “A human rights approach in impact investing can help investors proactively identify and account for social risks, impacts and opportunities, and therefore maximize positive impact at the investment and systems levels.” It made me realize that measuring impact isn't a one-size-fits-all deal. It's a mix of numbers, stories, and ethics. It's about being the first to ask the tough questions and championing change. How do we standardize? How do we create a verification model? How do we ensure complete transparency? What can the accountability mechanism look like? What pieces do we pick up as a student team together? I face these questions about impact measurement right now and I can't wait to see where these questions take me next. They're like breadcrumbs leading me toward a career where making a difference isn't just a bonus – it's the goal.