The first question anyone who is introduced to the impact investing world invariably asks is, ‘Can you have investments that can create immediate positive impact?’ and the second question is ‘Can you measure that impact?’. The answer to both these questions as we know is a resounding Yes, but then to explain how that happens takes a while – for most people the impact measurement field is a completely unknown one. Thus, to grasp the nuances around it becomes difficult without understanding the basic terms.
Impact Investment has developed rapidly over the past decade, representing the confluence of development goals with financial sustainability and discipline. At the heart of the sector are Impact Enterprises (IEs), and it is in response to their requirements for capital to grow that the rapid evolution of the sector has been necessitated. As the early IEs have scaled, a common theme that consistently emerges is the need to leverage equity by accessing debt at the appropriate time.
The last decade has seen a distinct mainstream shift towards responsible investments that address critical social needs and environmental challenges in addition to achieving financial returns. The growing global push towards sustainability means that measuring and communicating impact has become increasingly important for all entities aimed at achieving social and/or environmental goals.