A growing number of investors want to put their money behind enterprises that have measurable, positive impact on the environment, workers, women’s rights, and other issues. The problem? There is no standard way to measure and report the impact of an enterprise.

It isn’t for lack of trying. For the last several years, new investor-led groups like the Sustainability Accounting Standards Board (SASB) and Task Force on Climate-related Financial Disclosures (TCFD) have been developing proprietary reporting frameworks for companies to adopt. SASB and TCFD have earned the endorsement of BlackRock CEO Larry Fink, who urged clients earlier this year to embrace sustainability in their portfolios. 

Such an endorsement is a step in the right direction, though there are still hundreds of groups jockeying to make their frameworks the global standard.

“When you have too many competing frameworks, it’s difficult to understand the impact of your investments because you can’t use them to compare portfolios or companies,” said Ronny Beck, Hinduja Bank’s Head of Investment. “The data you report is just numbers on a page if there’s no standard to measure against.”

There seems to be some movement in the right direction, including through the Impact Management Project. A global forum to build consensus on how to measure, compare and report impacts on environmental and social issues, the IMP counts more than 2,000 organizations, and their varying tools and definitions, as participants, including the United Nations, the OECD, and the World Benchmarking Alliance. 

Five years into its work, the participants have agreed that the following questions are what shape impact:

  • What outcomes the enterprise is contributing to and how important the outcomes are to stakeholders
  • Which stakeholders are experiencing the outcome, and how underserved they were prior to the enterprise’s effect
  • How many stakeholders experienced the outcome, what degree of change they experienced, and how long they experienced the outcome for
  • Whether an enterprise’s and/or investor’s efforts resulted in outcomes that were likely better than what would have occurred otherwise
  • The likelihood that impact will be different than expected

What will it take to attach standards to each of these questions? The answer is likely to be a combination of existing efforts, regulation, and consumer and investor expectations. Just as norms for traditional financial reporting evolved over time, the norms for understanding impact have their own path to take.