Making an investment with the intention of generating social and environmental impact alongside a financial return is called “impact investing.” By definition then, success depends on our ability to measure impact – how much and what kind of impact did we generate? It has been ten years since the phrase “impact investing” was first coined and we have come a long way in terms of evaluating the impact of individual companies (e.g., GIIRS) and across asset classes (e.g., iPAR) but how do we measure impact across a portfolio of direct investments?
At Investors’ Circle’s PCC Funds, we are thinking about impact during every pitch heard, every due diligence completed, and every investment closed. Recently, we partnered with a CASE i3 team at Duke University’s Fuqua School of Business to develop a tool to systematically quantify the impact of the PCC portfolio.
The first step in building our impact model was to identify the underlying impact metric for each PCC portfolio company. Example company-specific metrics included pounds of trash removed from US waterways and number of low-income tenants benefitting from a platform. We then developed a short list of higher-level Key Impact Indicators that reflected the diversity of impact within our portfolio. The figure below illustrates the collective impact of our portfolio in terms of these Key Impact Indicators: