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There’s no doubt in my mind that one of the biggest barriers to the growth of impact investing is the lack of consensus about what ‘impact’ actually means.

If you’re a big investor looking to commit your money to investments that are making a positive difference, how can you be sure that everyone involved in the process shares your understanding of what you’re trying to achieve? Or to look at it another way: if ten different investment opportunities have ten different ways of stating their goals, and ten different ways of reporting their impact, how are you supposed to judge which one is the best fit for you? The inevitable result is that investors feel unable to make an informed decision, and their capital remains on the sidelines.

The good news is that people in the sector realise this uncertainty is a threat to future growth – and are coming together to find a better way forward. One promising example of this is the Impact Management Project, an initiative involving some 1,500 stakeholders from across the field – from giant wealth managers like BlackRock and UBS, to pension funds like PGGM, to foundations like Omidyar and Ford, to large corporates like Mars, to policy-makers, intermediaries and entrepreneurs (and facilitated by Impact+, our advisory arm). This is the first truly sector-wide effort to produce a commonly-recognised convention for analysing and talking about impact – so we can have a shared language to talk about our goals, and a shared framework to assess how successful we’ve been in achieving them.

The first phase of the project was all about trying to agree the intellectual framework. What is ‘impact’? The eventual consensus – based on a series of workshops and discussions – was that we can break it down into five dimensions: What (which outcome are we trying to achieve); Who (who’s our target group, and how are they underserved in relation to that outcome); How Much (what is the depth, duration and scale of the impact we want to achieve); Contribution (to what extent are we doing something that wouldn’t have happened anyway) and Risk (what’s the risk of us not achieving the desired impact). This analysis then underpins every aspect of the impact management process.

With the core concepts established, the focus shifted to real-world application. A number of the key partners involved have already started to incorporate these ideas into their own practices: some, like UBS, Root Capital and PGGM have published reports outlining their own experience. The Project will be drawing on the experience of these early adopters to publish detailed guidance on adoption for different stakeholders in September.

The next phase of the Project is all about how the convention can be aligned with or embedded into sector-wide standards and benchmarks. And with organisations like the United Nations Development Programme (home of the SDGs), The Global Reporting Institute, the Principles of Responsible Investment, and The Global Steering Group on Impact Investing all involved in the process, there’s real optimism that this can be a game-changer.

UBS chairman Axel Weber recently argued in a piece for the FT that a lack of “market plumbing” was the main issue holding this sector back – and one key aspect of that was the need for better standards and benchmarks. So there’s a broad recognition within the financial markets of the importance of the work being done by the Impact Management Project (of which, incidentally, UBS has been a key funder). Let’s hope we can use this impetus to build an impact investing market that’s better-defined, more transparent, and more accessible to the big pools of capital that can help us build scaled-up solutions to the huge challenges we face.

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