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Quantitative values are an important part of measuring the financial performance of mutual funds and other investment vehicles. Financial performance is a part of sustainable investing as well, but as the field grows, it’s becoming clearer that impact also is something that needs to be measured.

It’s trickier to measure social impact than it is to measure financial impact, as social impact can be complex. There are various approaches, methodologies, and practices for examining the social impact, all of which are effective in their own ways. For these measurements to be effective as more than mere marketing tools, a certain level of rigor needs to be established. In a Harvard Business Journal case study, Ivy So, Alina Staskevicius, and faculty supervisor Alnoor Ebrahim sought to examine which methodologies would be best for analyzing impact investments.

Impact Measurement

Impact investing has been around for many years, and the field stands to grow in the coming years. It’s made an impact around the world and garnered the attention of organizations and governments. Despite this growth and attention, though, the methods for measuring impact aren’t as structured as they need to be. Understanding how different measurement practices work is key to applying them, which is what the Harvard study examined. Measurement can allow investors to monitor the progress of their funds and social causes; portfolio managers to make better decisions; organizations to make progress on impactful measures, and anyone benefiting from the impact to participating in their improved gains. Measurement also may help other stakeholders who want to evaluate impactful causes and organizations.

Current Methodologies for Impact Measurement

Today’s impact investors use multiple methods for estimating, planning, monitoring and evaluating social impact. These are some of the most commonly used:

Expected Return

This method is a way to calculate the expected values of a financial investment, usually as an average of profits against costs. This is a methodology that also could measure social benefits as a monetary value against costs. It can evaluate impact that already has taken place, or predict the value of activity ahead of time. This scale can help frame arguments by providing concrete numbers but may be dependent on context.

Theory of Change and Logic

The theory of change and logic model explains how an investment intends to cause social change. It strives to establish links between input, output, outcomes, and impact. This is a useful model for investors in the due diligence and investment selection stage who want to know what the path toward the future looks like, but it runs the risk of trying to fit social progress and positive change into a more definite timeline that can be guaranteed in the real world.

Mission Alignment

This is a way of assessing a portfolio’s mission against an investor’s, to ensure the strategies and end goals are close matches. These methods usually use screens and scorecards to measure investment criteria and key performance indicators. Adopting scorecards tailored to the impact investing sector can help with data collection, but the information and indicators could vary across investments.

Experimental and Quasi-Experimental

These methods can be used to evaluate impact after a program or investment has taken place. They examine what the situation would have been without the investment and the changes that can be traced back to it. Experimental methods use randomized control groups to ensure all the groups are treated equally, except for a single change. Quasi-experimental methods don’t use groups, instead, they use previously established patterns or other sources of information. Experiments can be costly (quasi-experimental programs less so), but provide very concrete evidence to inform decisions.


Investors, investees and other stakeholders need to have an incentive to devote resources to measuring impact. Entrepreneurs might have limited time and resources to monitor impact; beneficiaries might feel disconnected from impactful efforts; investors might be wary of their financial returns in the impact sector, and fund managers aren’t necessarily rewarded for delivering a high social return on investment. Impact measurement needs to be accurately assessed to build a solid foundation for the kind of market that can offer substantial incentives for stakeholders.


Additionality is a measure of whether the positive impact generated by an organization or investment would have happened regardless of the investment. Investor-level additionality worries about the impact the investor has on the investee’s ability to produce social impact, whether it’s through their capital or some form of non-financial assistance. Enterprise-level additionality looks at whether the investee can deliver its outcomes through the goods or services it offers or its management practices without an investment. Investors should be encouraged to measure additionality, and enterprises to include it in their impact reports, to help measure impact.

Impact Measurement Approaches Integrated

Each investment is different, and each investor might be at a different stage of the investing process or vary in the resources available. Investees might be at different stages of implementing social impact measures. One of the most comprehensive combinations of approaches is what the Harvard study recommends for a mature impact investor and an investee in the late stages of organization and sophistication. Here is a list of steps investors can use to be thorough about measuring the impact of their funds:

  • Start with an expected return calculation to compare the impact of potential investments.
  • Consider enterprise and investor-level additionality.
  • Work with the investee to determine key performance indicators to track on scorecards.
  • Work with the investee to gather data on the key performance indicators, then analyze the data to learn about the social impact.
  • Measure social impact with a quasi-experimental evaluation.
  • Map a personal theory of change.
  • Integrate the impact measurement efforts into the investment portfolio team, and reward portfolio managers based on results.

For investors who can’t do all the above steps, work with early-stage entrepreneurs to develop a logic model so you’re on the same page about the path to impact. Adopt social criteria to rate your investments and monitor them once you invest.

Impact Investing With Falcons Rock Impact Investments

With so much information out there and so many ways of looking at it, measuring impact can be a challenge. Falcons Rock Impact Investments can help conscientious investors make informed choices based on their finances, risk tolerances and investment goals. We screen our funds for impact as well as financial performance so you will feel confident in your investment vehicles. Learn more about our impact investing process to get started.