Impact invest­ing con­tin­ues to grow, but how do we actu­al­ly ver­i­fy the change our cap­i­tal cre­ates?

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Lisa Knob, Man­ag­er, evo­lu­tiq Impact Advi­so­ry

Impact invest­ing con­tin­ues to grow, but how do we actu­al­ly ver­i­fy the change our cap­i­tal cre­ates? Impact report­ing is a core part of effec­tive impact man­age­ment – define, mea­sure, man­age, and report. New stan­dards such as the Impact Per­for­mance Report­ing Norms from Impact Fron­tiers are help­ing investors track real out­comes and com­mu­ni­cate them clear­ly.

Why does impact report­ing mat­ter?

Impact report­ing builds trust and trans­paren­cy across the ecosys­tem, which includes asset man­agers, investors, pol­i­cy­mak­ers, reg­u­la­tors, NGOs, and the pub­lic.  Clear, evi­dence-based report­ing doesn’t just show­case results, it sup­ports bet­ter deci­sions. While some reports still feel like mar­ket­ing, the mar­ket is shift­ing toward a more pro­fes­sion­al, data-dri­ven approach. Such report­ing strength­ens the exchange between stake­hold­ers, pro­vides insights for the mar­ket, attracts new investors and helps orga­ni­za­tions to con­sol­i­date their role as pio­neers in the field of impact invest­ing.

Why are shared report­ing stan­dards nec­es­sary?

Right now, impact reports vary wide­ly in terms of their struc­ture and con­tent. They vary in fre­quen­cy, their com­po­nents and KPI selec­tion. That diver­si­ty reflects a dynam­ic and com­plex impact invest­ing sec­tor. But it also shows how impor­tant shared report­ing stan­dards are to ensur­ing trans­paren­cy and com­pa­ra­bil­i­ty with­out los­ing the flex­i­bil­i­ty need­ed for cus­tomized approach­es.

Reg­u­la­tion and mar­ket stan­dards

While a reg­u­la­to­ry frame­work for impact invest­ment already exists in the UK, which intro­duced an “impact” cat­e­go­ry under the Sus­tain­abil­i­ty Dis­clo­sure Regime in Novem­ber 2023, there is cur­rent­ly no spe­cif­ic cat­e­go­ry for impact invest­ing in the EU Sus­tain­able Finance Frame­work. For exam­ple, the Sus­tain­able Finance Dis­clo­sure Reg­u­la­tion doesn’t define impact invest­ing as its own cat­e­go­ry; SFDR focus­es main­ly on neg­a­tive impacts (PAIs), not pos­i­tive ones. Because inter­na­tion­al reg­u­la­tion is incon­sis­tent or miss­ing alto­geth­er, many play­ers fol­low mar­ket-dri­ven best prac­tices – par­tic­u­lar­ly stan­dards devel­oped by Impact Fron­tiers and the Glob­al Impact Invest­ing Net­work.

The Impact Per­for­mance Report­ing Norms

Released in 2024 by Impact Fron­tiers, the Impact Per­for­mance Report­ing Norms are a major step for­ward for stan­dard­ized, prac­ti­cal impact invest­ing report­ing in pri­vate mar­kets. They were co-cre­at­ed with lead­ing mar­ket par­tic­i­pants and estab­lish a shared base­line for what good report­ing should look like. Even though many investors still oper­ate with their own frame­works, stan­dard­iza­tion is the long-term direc­tion. The IMM­PACT Mod­el – devel­oped by the Ber­tels­mann Stiftung, PHI­NEO, the Ger­man Fed­er­al Ini­tia­tive for Impact Invest­ing, and SEND – could even­tu­al­ly help align with or com­ple­ment these Report­ing Norms to strength­en trans­paren­cy.

What’s next?

The future of impact report­ing will be char­ac­ter­ized by more struc­tured, com­pa­ra­ble impact report­ing, while still main­tain­ing flex­i­bil­i­ty for dif­fer­ent invest­ment strate­gies and types of impact.

Key devel­op­ments to watch:

• Impact Dis­clo­sure Guid­ance, which is led by major insti­tu­tion­al investors to advance both report­ing and impact man­age­ment.
• Stan­dard­iza­tion as a con­tin­u­ous jour­ney – today’s norms are a foun­da­tion, not the final step.
• Just as man­age­ment stan­dards like the Impact Prin­ci­ples became wide­ly accept­ed, report­ing stan­dards will con­tin­ue to evolve, with tar­get­ed updates.
• Reg­u­la­tion will accel­er­ate adop­tion, as author­i­ties are increas­ing­ly inte­grat­ing impact cri­te­ria into finan­cial rules.

For more details, check out the Impact Report­ing Webi­nar host­ed by the Ger­man Fed­er­al Ini­tia­tive for Impact Invest­ing on Wednes­day, April 9 from 4–5 pm. The ses­sion brings togeth­er method­olog­i­cal, prac­ti­cal, aca­d­e­m­ic, and reg­u­la­to­ry per­spec­tives. You can reg­is­ter here.

About the author:

Lisa Knob is a man­ag­er at evo­lu­tiq Impact Advi­so­ry, a Cologne-based bou­tique con­sul­tan­cy focused on impact and sus­tain­abil­i­ty. She advis­es finan­cial insti­tu­tions on strat­e­gy, mea­sure­ment, and impact man­age­ment. Lisa is also pur­su­ing a PhD in Sus­tain­able Finance at the Uni­ver­si­ty of Kas­sel, research­ing impact report­ing in invest­ment funds. Pre­vi­ous­ly, she spent four years at Deloitte work­ing on EU sus­tain­able finance reg­u­la­tion.