28-03-2025
Reframing The Impact Measurement Conversation
Standardized impact measurement is key to advancing the flow of capital to impact.
By Allison Boxer
Over a plate of local Utah cookies in a sunny conference room of our new office space at the Impact and Prosperity Epicenter, the Sorenson Impact Institute's leadership team recently dove into the 2024 State of the Market report from the Global Impact Investing Network (GIIN). Our agenda was to analyze trends and implications for our work, but one topic, in particular, became the focus of extended debate and discussion: the purpose and value of standardized impact measurement.
The persistent nature of the topic of standardization (it consistently ranks high on impact investors' list of frustrations, it seems) spurred this roundtable discussion. According to the GIIN report, investors face three main challenges with measurement: fragmentation of measurement frameworks, difficulty in comparing results, and verifying the impact data itself. Despite these challenges, the majority of investors (70%) are using generally accepted impact measurement frameworks such as IRIS+, SASB, GRI, and HIPSO. This presents a paradox: while a majority of investors are attempting to apply standardized frameworks, measurement-related challenges remain the most acute. So much so that 30% of impact investors are not using standardized methods at all.
All of this helped us reframe how we think about impact measurement by recasting the broader conversation around why it's truly important and how it can best be accomplished, starting with this question:
How can an impact investor standardize impact outcomes in a way that allows them to compare an organization's impact on kindergarten readiness with a different organization's impact on curbing deforestation? Or, for that matter, how would an impact investor standardize an organization's impact on kindergarten readiness in Canada versus another organization's impact on kindergarten readiness in Brazil? One colleague argued that, fundamentally, standardization leads to watering down metrics such that the measurement is no longer useful. Therefore, they concluded, the whole exercise of standardizing impact measurement is simply impossible to do in a meaningful way. A fair point.
I took a hard line in the other direction. I argued that we have something to learn from the history of financial accounting and reporting, which we now consider highly standardized but was not even developed in the early 20th century (the Federal Reserve set the first standard in the United States in 1917, and auditing was mandated in 1933). Financial accounting and reporting have a lot more wiggle room than I think we choose to acknowledge. And financial accounting and reporting are only useful when the analyst knows the company's goals and strategy.
I also argued that the goal isn't to standardize in order to compare all impact areas with each other. For example, I like what SASB has done by identifying what is material for any given industry, making it more of an apples-to-apples comparison, and only on relevant dimensions. Taking financial accounting and reporting as a case in point, much of financial analysis depends on the competitive set the analyst selects. For example, an exit multiple for a SAAS company is not determined by looking at the recent exit multiples of a tugboat company.
But the truth is, I don't disagree with my colleague. The reality isn't nearly as binary as for or against standardization. Our discussion evolved.
As an Institute dedicated to the growth of the market for impact, this is a key question. Capital markets need some way to measure and evaluate outcomes to allocate capital. So regardless of our ideological conversation, it's a necessary condition of capital flows. And as our goal in impact investing is to increase the flow of capital to impact, the GIIN data shows that forward movement in standardizing impact measurement is needed.
That question was easier to answer, but it leads to other considerations, such as: Why do we care about standardization of impact outcomes, and when is it most helpful?
A few notable benefits came up during our discussion. First, comparability allows capital allocators to more effectively identify and fund projects with the greatest potential for positive outcomes. This also enhances tradability. With comparable outcomes, investments become more liquid, which leads to increased market development. Standardization can also reduce due diligence burdens. Clear, standardized metrics allow wider participation from investors who might otherwise hesitate from uncertainty around impact data and more efficiency in deploying mission-aligned investments.
For new and smaller entrants, turnkey frameworks and reports offer a significant advantage. Instead of developing custom measurement approaches, organizations can adopt established tools, skip that time-consuming and expensive hurdle, and accelerate their participation in the impact investing space.
Furthermore, standardized metrics foster transparency and credibility. When consistent metrics are used, investors gain confidence in the legitimacy and effectiveness of impact claims, enabling a level of trust essential for the continued growth of the impact investing market.
Lastly, standardization plays a critical role in policy setting. When outcomes can be reliably compared, policymakers are better equipped to assess program effectiveness and design incentives that guide capital toward the most impactful solutions. Standardization supports a more efficient and impactful allocation of resources by those who, though not subject matter experts, have enormous influence on the distribution of funds.
After thinking through these benefits, we thought that rather than asking, 'Is standardization possible,' a better set of questions might be:
In other words…
As we start looking at this question, I go back to the SASB approach, which identifies material issues for each industry. This approach leads to standardization of organizations within a field rather than across fields.
For example, one of my colleagues noted that in the climate space, impact measurement helps us evaluate opportunities on a global scale. Because climate represents a global crisis, it is helpful to know which interventions and which locations will produce better outcomes to prioritize investment. Targeting the most effective and efficient interventions will help us better address the crisis as a whole and save the planet sooner. However, this is not necessarily the case in early childhood development, where moving a dollar from India to Brazil is neither feasible nor objectively considered a better investment.
While our round table conversation raised more questions than answers, these questions outline a pathway for new ways of thinking about impact measurement. Our goal is to reframe the broader conversation away from a binary argument by asking new and different questions.
In our discussion, we felt it would be helpful to identify the potential criteria to make a field ripe for standardization. They should have:
Using this list, fields that may be ripe for standardization of outcomes measurement and reporting could include climate change, public health, financial inclusion, and economic development. Fields where standardization may be less useful include early childhood development, community development and social cohesion, and policy advocacy.
It's helpful to bring in the perspective of my colleague Dr. Nzinga Broussard, head of our impact measurement and management practice. She explains that she is less interested in standardized metrics themselves and more interested in a standardized approach to thinking about measurement that enables investors to better understand why and how outcomes measurement is determined. Dr. Broussard has observed that while some entities have notably attempted to standardize outcomes by converting them across organizations and fields into dollar values, those expected to implement the approach almost always push back. Their critique is that interventions that can be more easily monetized will inevitably attract greater investment even when they are not the only approaches meriting investment.
Most impact professionals agree that impact is equal to breadth times depth. So the goal, Dr. Broussard explains, is to design a way to measure breadth and depth since these two dimensions define impact. We can easily calculate breadth, she points out. Measuring depth is harder. The way to develop effective impact measurement is to develop a framework around how to measure depth. In response to this challenge, Dr. Broussard advocates for monetization accompanied by a narrative so that benefits that cannot be monetized are not overlooked.
Dr. Broussard's hybrid model brings me full circle to the example of financial reporting, which has coalesced over the past century into a standardized set of metrics and accompanying notes, sometimes hundreds of pages long. This data is extensive, and it creates a narrative that allows investors to find the nuance they need to make investment decisions. As with financial reporting, impact measurement and reporting will likely coalesce into a combination of standardization and nuance via narrative.
By the end of our roundtable discussion, our team had shifted the conversation. Rather than a binary discussion about the merits of standardization across all industries, we sought to understand where standardized measurement and reporting would be most useful to address specific market challenges and how to identify boundary conditions for where standardization would be most practical. Our hope is that reframing in this way will similarly help the industry move forward in a way that helps investors feel more comfortable channeling capital to impact ends.
Allison Boxer is the Managing Director of Impact Academics at the Sorenson Impact Institute and the James Lee Sorenson Presidential Endowed Chair in Applied Research. She leads all academic programming and program development related to Impact Investing and social impact. At the University of Utah's David Eccles School of Business she teaches the courses Social Impact Strategy and Innovation, Global Ventures, and Social Entrepreneurship, among others. Additionally, Allison leads strategic planning for the Business School as Strategic Advisor to the Dean of the David Eccles School of Business at the University of Utah.
