You cant manage what you dont measure. Its
such a fundamental rule of business that it hardly bears
repeating in the day-to-day work of running a small firm, a
major corporation or an investment fund.
But there are times when a business moves into lesser-known
territory, where all the usual measurement tools come up short.
I see this happening more and more as businesses embrace things
like sustainability and corporate social responsibility
even happiness and quality of life. Terms like triple bottom
line or third metric attempt to quantify some of the important
benefits of their work but do not fit neatly onto a balance
Another one of those terms is
impact investing. Now, impact investing is a term very dear
to me and very core to the work of the Overseas Private
Investment Corp. (OPIC), the U.S. governments
developmental finance institution. But its also a term
that, without the backing of some solid measurement tools, runs
the risk of being misunderstood as one of those nonserious,
touchy-feely activities that businesses engage in solely to
improve public perception.
Impact investing seeks to address common challenges such as
access to education, financial inclusion, housing, health care
climate change while at the same time generating sufficient
returns to constitute viable investments. An even shorter
definition is that impact investments seek to do well by doing
But how do you quantify that?
At OPIC, we found there was no simple way to determine which
of our investments were, in fact, impact investments. So when
we took a look at how we could best assess which of our
projects were garnering positive returns for both the target
communities and the investor, we used the following
Does the project aim to have a positive
developmental impact? Because OPICs mission is
to support development, we consider every projects
potential developmental impact at the outset and ensure that
all the projects we support meet this standard.
Is the investment in a high-impact sector?
From there, we looked at how we might define a smaller subset
of our portfolio, so we counted only those projects that were
in what we term high-impact sectors, which often face
challenges raising capital, such as low-income housing,
microfinance and renewable energy. Last year $2.7 billion out
of OPICs $3.9 billion in financial commitments was in
those economic segments.