J-M. Severino
E. Nocquet
E. Debled
C. Bourrin

There is no such thing as impact, but only proof of impact (second part and end)

Nov 06, 2018

The first part of this blog is available here.

II. How can impact intentionality be embedded in investment activities?

To help concretely embed impact intentionality in impact investing activities, we offer a matrix of three I’s: “Impact thesis and targets, indicators and incentives”, which are based on our experience and good practices observed among our peers.

Impact thesis and targets

Any intentional impact approach must entail a preliminary explanation of the common good issue being targeted and answer three main questions: What is the nature and extent of the social and/or environmental problem to be solved? What investing activities should be undertaken to address this issue? What are the expected effects on the target population? This general impact thesis can then be broken down into a set of specific impact objectives to be achieved through the investments and their main stakeholders (clients, employees, subcontractors, etc.).

These impact objectives need to be linked to the new Sustainable Development Goals, as a harmonized international standard. Their credibility, however, relies directly on the investments’ local context, which should be duly documented: as an example, if a job creation objective is fully relevant in some target areas and populations, it may not be in others.

Internally, the team will be united around precise and credible objectives. These goals will provide an objective, clear and measurable ("SMART") basis for selecting investment projects according to their expected impact and allow the team to monitor and evaluate the impact once the investments have been made.

Indicators We act according to what we measure: to ensure a true impact-led investing strategy, key performance indicators ("KPIs") must be implemented to assess performance all along the impact value chain:

  • From resources committed to investing activity, namely inputs, such as capital invested, level of managerial support (in person-days, weeks..) or number of technical assistance missions organized;
  • To tangible results from the investing activity, namely outputs, such as the number of companies financed and supported, the leverage effect of the investment on other funding sources, the company profitability and growth;
  • To the main changes and effects on the target population at the investee stakeholder level, namely outcomes, such as the basic goods or services provided to local residents or the number of jobs created by investee companies, etc.

Going further would involve a scientific evaluation of impacts, as longer-term outcomes adjusted for what would have occurred anyway (without the investment, as an example). However, impact evaluation in its strictest sense remains a challenge for the impact investing industry, as explained in the next section. It is also necessary to question the fund’s objectives at two levels:

  • At the portfolio level: which indicators or ratings are relevant and easy to collect for all investments?
  • At the level of each investment: can we define some key company-specific indicators? To go further, it may be appropriate to build an impact-based business plan, specifying impact targets to be achieved year after year or even a comprehensive logical framework, derived from philanthropy projects and development aid methods.

Depending on the objectives and the means available, several forms of evaluation can be considered, including regularly collecting impact metrics, defining practice ratings, and conducting field surveys, as detailed in the next section.

Incentives An impact investing team’s commitment to impact performance can ultimately be reflected in financial incentive structures. In recent years, several impact funds have developed impact-based incentive structures, which tie "carried interest" or other kinds of team compensation, not only to financial objectives, but also to extra-financial ones. These pilot initiatives come from impact fund managers1 or some of their investors, such as the European Investment Fund, which makes this a pre-requisite for any funding and has developed a specific method.

In practice, these approaches can be complex to implement, especially for "open-ended" funds or for recent funds without an impact management track record. They can also be poorly viewed by some teams, who consider that impact motivation is in no way linked to compensation.

However, these systems include some valuable benefits: they promote a shared impact vision between investors and fund managers and enable impact management to become a key topic for monitoring and governance. They also enhance the reliability of impact measurement systems if combined with external audit mechanisms on target indicators. Finally, they pave the way for similar approaches in investee companies.

III. How to prove impact?

To complete this overview, a final question remains: what do impact funds have at their disposal to fully carry out their impact objectives in practice?

Human and organizational resources

Fund managers should be at the forefront when setting up and implementing an impact policy. This is particularly crucial for the investment team, which must fully take into account the impact objectives and ESG criteria when evaluating a deal. Specific and ongoing training on these issues is necessary. Many funds opt for a specifically dedicated team to the management and monitoring of the impact policy to coordinate the approach and share experience.

To go further in the implementation of the impact thesis, a mission-driven form of governance should be implemented. As an example, ad hoc impact committees can be formed to review the fund’s impact management policy and submit proposals with regards to various ESG and impact issues (strategy definition, performance analysis, etc.…). In addition, it is critical to ensure that the Investment Committee possesses impact management skills to challenge the investment projects on these dimensions. This approach has been adopted by I&P for its most recent funds. Finally, external audit mechanisms or certifications, such as GIIRS ratings2, will enhance the reliability and credibly of the impact management system.

Impact tools

A series of hands-on tools should be put in place to facilitate impact monitoring and evaluation. These tools are indeed useful throughout the entire investment process, including during the due diligence phase. Based on its core impact objectives, I&P has, for instance, developed an impact screening scorecard, which allows the team to assess the potential project impact on its key stakeholders (employees, clients, subcontractors) and make sure the project is aligned with the impact thesis of the fund. The scorecard lays the groundwork for further discussion on the project. Impact measurement tools are used to track the results of the portfolio during the investment period. These tools are based on a series of impact metrics, some common to all investees and some specific to each business.

After several years of impact measurement at I&P, we have noted that portfolio-wide aggregated impact indicators have refined our understanding of already well-known impacts, and also represent a powerful communication and goal-setting tool for new funds. They remain, however, insufficient to allow us to understand the complex realities of each partner company: for this we need to go out in the field and meet the company’s employees, customers, producers and distributors to get to know them better and identify actions for improvement. Such field studies are based on a multi-week field survey and provide valuable insight into a company's impacts on its stakeholders and environment.

Unfortunately, due to limited resources, these evaluations can only be conducted on a limited number of investments. These assessments are closer to more rigorous impact measurement and are instrumental to “improving” operations and promoting a culture of learning. However, they do not "prove" any impact in the scientific sense of the term: in the absence of "counterfactuals", the impacts observed on the ground cannot be attributed precisely to the investment made, and their duration, beyond the evaluation period, cannot be measured.

Each fund may develop their own tools, those best suited to their needs and impact objectives. What ultimately matters is how well team members – and investees – are able to understand and make use of/leverage these tools.

Communication and transparency

Last but not least, impact funds should openly communicate on their methodology and impact results, not only for the sake of transparency but also to share good practices among practitioners in the spirit of the sector itself. Without exposing its investees, a fund can communicate the aggregate impact figures collected annually, providing evidence of how these results have contributed to its impact objectives. It is equally important to present how these results were identified and how they have been attributed to the fund.

Let’s not forget here the importance of networking and peer-review: there is much to learn in observing how other funds are proceeding and in sharing what is working.


A famous French saying claims, “There is no such thing as love but only proof of love”.We could say the same about impact investing.

True impact investment goes well beyond declarations of impact or lofty speeches. As impact investors explicitly aim to contribute to a public cause through the use of a market instrument, their methodological approach consists in first identifying this objective, getting organized and incentivized, and then accepting the consequences, in terms of financial profit (or lack thereof) associated with their objective. In some rare sectors, it is possible to combine high returns with an impact thesis. However, even in such cases, the legitimacy of an impact approach is rapidly weakening as the level of expected profitability is beginning to attract conventional investors. In practice, it is often necessary to make trade-offs between profit and impact. This is why a rigorous process of qualifying, measuring and evaluating results, as well as aligning interests, as presented in this paper, is essential for several reasons: to justify and legitimize the trade-offs between performance and impact that we have just highlighted, to outsource the societal-added value that is at the heart of the impact investing process, and to differentiate between “true” and “fake” impact investors... To present proof of impact is the only proof of true impact investing.


DCED, Juillet 2017, Attribution in Results Measurement: Rationale and Hurdles for Impact Investors
GIIN, 2017, Annual Impact Investor Survey
Novethic, Juillet 2017, Les investisseurs en quête d’impacts. Stratégies, innovations et défis
Issue Brief, GIIN, December 2011, Impact-based incentive structures


Examples of impact-based incentive structures implemented in impact funds are included in this issue brief from the GIIN:



About the Authors

Jean-Michel Severino is the CEO of Investisseurs & Partenaires (I&P) since 2011. He previously held the position of Vice-President for East Asia at the World Bank (1996-2000) and Chief Executive Officer of the French Development Agency (AFD) from 2001 to 2010, therefore heading its private sector investment arm, PROPARCO. He served as a member of the UN General Secretary’s eminent persons’ panel on the post 2015 development agenda. He co-authored “Africa’s moment” and a book on African entrepreneurs with J. Hajdenberg.

Elodie Nocquet, ESG & Impact Director, joined I&P in 2009, where she previously held the position of investment officer. She designed and implemented I&P ESG & Impact management system in 2012, and is now responsible for ESG & impact on a full-time basis. She participated in industry initiatives such as the G8 impact investment task force and the Principles for Responsible Investment. She is trained to the CDC (UK) Toolkit on ESG for fund managers.

Emilie Debled, PR and Business Development Director, is in charge of I&P’s communication, advocacy, partnerships and fundraising. Prior to that, Emilie spent 10 years in major international communications and branding groups Publicis and Havas. Among her clients, Emilie advised leading European financial firms such as Amundi Asset Management, Natixis and African banking, and financial institutions such as BMCE Bank and CDG Group. She earned a Master in Marketing and Communication at EDHEC Business School.

Clémence Bourrin, PR & Communication Officer, joins the team in April 2015 as Communication and Public Relations Officer. She works on I&P’s advocacy and communication campaigns. Prior to this, Clémence notably worked on Fundraising and Communication issues at the World Fair Trade Organization Asia, an NGO specialized in Fair Trade in Southeast Asia. She graduated from a Master in International Development from Sciences Po Paris.


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