Impact special: measuring the double bottom line

For some fund managers, measuring progress towards impact goals is just as important as assessing financial performance.

“If you’re not measuring it, you’re not really doing it.” So said Bob Collymore, chief executive officer of Kenyan telecommunications company Safaricom, in response to an onstage question at the Scaling Impact Investment forum in New York on whether his company was tracking its progress against impact metrics.

“If you’re not measuring it, you’re not really doing it”
Bob Collymore

Private equity firms are, of course, no stranger to measurement, holding their portfolio companies to account on a vast number of carefully crafted metrics designed to capture just how much value they are creating during their hold period.

For firms with a “double bottom line” – chasing not just financial but social returns – this goes one step further. Along with financial performance, they must be able to present their specific impact goals for their portfolio companies to their investors in a concrete way– and whether they have been able to achieve them.

“If you are going to have a double bottom line, just like accountants keep you honest on your financial bottom line, you need to have independent outsiders who are qualified, who have access to what you’re doing, who are clear about what your performance measures are, and actually keep you honest to that,” Kito de Boer, head of impact at Abraaj, told delegates.

“That’s part of what Bill and Melinda Gates’s legacy is to the development world: to measure it. I think that’s going to be central to what we try to do.”

Measuring impact is not just to keep limited partners happy; 97 percent of respondents to the Global Impact Investing Network’s 2016 Annual Impact Investor Survey said measuring social and environmental impact was either ‘very important’ or ‘somewhat important’ because it produces data that itself has business value, and can, therefore, improve the financial performance of portfolio companies and inform future investment decisions.

One indicator which can help LPs assess a fund’s impact credentials is the GIIRS (Global Impact Investing Rating System) Rating. Each portfolio company is evaluated through the B Impact Assessment, a metric which measures the overall impact of a business on all of its stakeholders. This is then rolled up to give the whole fund a GIIRS Rating. “That’s a nice one because it gets granular on each portfolio company,” says Michael Whelchel, a co-founder at impact-focused investment bank and placement agent Big Path Capital.

“Of the funds that we’ve worked with, maybe 20 percent are GIIRS rated.”

Some DFIs set out their impact measurement requirements in side letters and explicitly state measurements they expect the fund manager to undertake along with reporting requirements at the fund and company level.

Anubha Shrivastava, the former head of Asia investments at CDC Group, is now setting up an impact investing initiative at Harvard’s Kennedy School of Government. When she was at the development finance institution, it set out ESG requirements in side letters.

Her advice for limited partners approaching the impact investing space is to very clearly define for themselves the impact they are aiming to achieve with their investments, and then work with GPs to ensure those goals are met. She recommends LPs “enshrine it in documentation, not to make it legally binding but to help people to remember what they had agreed on early on”.


Impact-focused investment bank and placement agent Big Path Capital has worked with more than 130 impact funds. The firms it works with seek the same financial returns more mainstream private equity funds promise their LPs.

“We brand it ‘smarter money’,” co-founder Shawn Lesser tells PEI. “We’re looking at companies and funds that maximise impact and maximise returns. We’re not looking at things where there’s a trade-off.”

Lesser’s partner Whelchel has a saying — “soft hearts can lead to soft minds” — to warn investors about the perils of overlooking basic financials in the face of compelling impact opportunities.

“We really guard against that. You’re looking at the business models and metrics first, and then look to the impact.”

For Shrivastava, around 70 percent of the funds she reviewed during her time at CDC Group were promising to deliver the industry-standard 20 percent internal rate of return.

While this metric should be “revised across the board”, as it doesn’t hold for mainstream private equity either, it is “absolutely possible to get top quartile financial returns” with impact funds, Shrivastava says.

The pooled since inception internal rate of return for a private equity or venture capital impact fund in vintage year 1998-2014 was 5.76 percent, according to data from Cambridge Associates.