IIC KPMG State of IMM in India

IMPACT MEASUREMENT
AND MANAGEMENT IN INDIA

A POSITION PAPER
State of IMM in India 1

Table of Contents
Foreword�� 04
Executive Summary��06
1. Scope and Objective of the Report��09
2. Methodology�� 12
3. Introduction: Getting to know IMM�� 13
4. Macro Overview��14
5. Micro Overview��26
60
28 44 Stage V:
Monitoring
ECOSYSTEM PARTNER –
51
and Exits
36
Stage III:
SWISSNEX INDIA Stage I:
Impact
Swissnex India is the outpost Strategy Setting
of the Ministry of Education, Management —
Research and Innovation Stage II: Measurement Stage IV:
(SERI) of the confederation of
RESEARCH SUPPORT
Switzerland, in India. Housed Deal Origination and Analysis Reporting
The authors would like to
acknowledge the contributions
at the Consulate General of and Screening
Switzerland in Bangalore,
ACKNOWLEDGMENTS of members of the IIC and
Swissnex India coaches Swiss
Impact Investors Council (IIC) KPMG team who provided
startups for India market
and KPMG have jointly valuable input, support and
entry, advises Swiss corporates
prepared this report. review of this research report.
on corporate innovation
engagement with India and
Ramraj Pai facilitates collaborations
CEO, IIC 6. Appendix A :List of Respondents�� 72
AUTHORS for Swiss Universities and
Devang Bhandari academicians in India. With
Santhosh Jayaram, 7. Appendix B: References�� 73
Partner, KPMG
Partner, KPMG several of coached Swiss startups
successful in the Indian market,
Sakshi Uberoi 8. Appendix C: Glossary�� 74
Neha Bhatnagar, the partnership with Impact
Associate Director, KPMG
Head of Partnerships and Research, IIC Investors Council (IIC) and Swiss 9. Appendix D: Assessing Impact Using the Five Dimensions�� 75
Impact Investment Association
Swasti Saraogi
Senior Manager, IIC We would like to thank all the (SIIA) aims to scale the efforts in 10. Appendix E: IFC’s Operating Principles for Impact Management�� 77
organisations that contributed impact investing to springboard
Shriya Nene through participation in the Swiss innovations to find curated
Research Associate, IIC survey. opportunities in India.
2 State of IMM in India State of IMM in India 3

Foreword
Impact Measurement and Management (IMM) is the ‘cornerstone’ of impact

investing. The measurement of impact performance is crucial as impact investors
scale up financing to achieve the United Nations’ Sustainable Development Goals
(SDGs). With impact investing all set to become mainstream in the post-COVID
world, ‘impact performance’ is bound to evolve as a new dimension to evaluate
performance of all types of investments.
Impact Investors Council (IIC) and KPMG undertook an industry-wide survey of

Impact Investors active in India in an attempt to capture the baseline state of
IMM practices in the country. The report provides insights on current Indian IMM
industry practices through a macro and a micro lens: what has worked well and
what the industry unanimously identifies as areas of improvement.
Overall there has been a significant improvement in investor’s understanding

of the relevance of IMM in India. Investors have begun to embed IMM in all key
investment decisions. The SDGs have also provided a much needed common
language to compare impact outcomes across the globe.
A majority of impact investors use sophisticated proprietary tech-enabled

tools to capture impact data and monitor performance. While these investors
have attempted to align their impact reporting with IRIS+ and other global
standards, the Indian context poses its own unique challenges to 100% alignment.
Nonetheless, impact reporting has gained importance with an increasing
number of investors publishing standalone public impact reports annually.
Although there is a need to standardize metrics for comparability, there are

inherent challenges relating to the differences in the way impact is generated
let alone variation in external factors. But what is encouraging is the progress in
IMM to compare with the objective with which the investment was made. The
right objective set through a participatory approach of stakeholders including
beneficiaries will be the key to mainstreaming IMM.
We are grateful for the support from all survey participants and industry
practitioners who helped build this report.
On behalf of the team members of Impact Investing Council of India and KPMG.
Ramraj Pai Santhosh Jayaram

CEO, Impact Investors Council Partner, KPMG

Executive Summary
Over the past few years, the role We developed a framework that WE DEVELOPED
of impact measurement and attempts to evaluate an Impact Fund’s A FRAMEWORK
management (IMM) has become IMM approach and practices at each
THAT ATTEMPTS
increasingly critical in driving the stage of its investment life cycle. Using
TO EVALUATE
progress of the impact investing the framework as a base, an extensive
industry. In India, while the industry research survey of 26 impact funds was AN IMPACT
has grown multifold, IMM continues undertaken to gather insights on the FUND’S IMM
to evolve. Hence, it is important to current Indian IMM industry practices, APPROACH AND
understand the current state of IMM at both macro and micro levels. The key PRACTICES AT
practices in the country, which can serve findings from the research survey have EACH STAGE OF
as a reference point to drive further been summarised below.
ITS INVESTMENT
discussions, research and best practices.
LIFE CYCLE
MACRO OVERVIEW
Given the cost
constraint, it is difficult to
Impact investors noted measure metrics
significant progress in LPs beyond the available
In terms of the impact data
and investee companies’ operating metrics of
itself, there are challenges
understanding of IMM. However, investee companies
around lack of sector level
they continue to face challenges
standardisation and associated
around its alignment, since
benchmarks . Further, the risk
LPs have varied measurement
of double counting impact
criteria and mandates.
continues to remain.
Impact target framework

is the most frequently
used framework among
impact investors.
Some of the global approaches

such as IMP dimensions, UN
SDGs and IRIS+ are beginning to
gain popularity and also being
leveraged by funds that have
developed their own proprietary
measurement system.
The industry spend on IMM appears

to be within the range of 5% and
15% of fund’s operating budget;
however, for many it is difficult to
identify this separately, due to the
internationalization of impact across all
its core functions

MICRO OVERVIEW
STAGE I: STRATEGY SETTING STAGE IV: REPORTING
Impact dimensions, as articulated by IMP, are popularly There is a growing trend for funds to
leveraged to translate impact strategy into action. push for transparency by publishing
Impact investors, however, struggle to quantitatively standalone impact reports, albeit
articulate contribution and evaluate any ancillary reporting is primarily on outputs
negative impact risk. instead of outcomes.
Impact goals are backed by either past evidence or Most investors do not conduct
developed according to a sound impact thesis. an independent formal audit on
Impact funds and their investors are making efforts to investees’ impact reporting and
build a formal L&D system for IMM-related education of rely primarily on self-reported data.
their employees. Most Fund managers stated that
The intrinsic culture of an impact fund is self-motivated while comparability is important, it is
to drive impact; hence, most funds do not have any not essential, largely on account of it
employee incentives tied to impact goals. being difficult to compare different
investments across diverse sectors.
STAGE II: DEAL ORIGINATION AND SCREENING
Most impact investors have embedded impact due

diligence as a part of the overall business due diligence
with investment teams trained to understand impact
STAGE V:
parameters and filters
Common due diligence approaches adopted by funds MONITORING AND EXITS
are– impact narrative, due-diligence questionnaire and
Most funds annually review their
quantitative tools. The due diligence questionnaire
impact operational plans.
approach is the most popular
The majority of the data collected
Impact funds work collaboratively with prospective investee
is leveraged to improve investee
companies to develop impact strategies and goals to
company’s products and services.
ensure buy-in
It was encouraging to know that while
More than half of the impact funds have tied investee-
attribution is a challenging issue for
related incentives (e.g., follow-on capital) to impact goals
the industry, the impact investors
do understand the significance of
attribution. A few have also started
STAGE III: adopting practices to address this
aspect - ranging from a disclosure as
IMPACT MANAGEMENT:
part of their impact reporting to use
MEASUREMENT AND ANALYSIS of a few methods in calculating it.
“Selection of a mission-aligned buyer”
The majority of the funds collect and analyse impact data
emerged as the key responsible exit
via investee companies on a quarterly basis. Only in limited
strategy for the funds. However, exit
circumstances, external consultants are leveraged to collect
constraints do exist.
impact data
Most funds use the company’s existing financial and operating
metrics to gauge the impact performance
Over half of the funds have set up an impact oversight
committee to oversee the IMM process and the rest have created
separation of roles to ensure an acceptable level of oversight
Figure 1 IMM framework across the Investment Lifecycle
1 SCOPE AND OBJECTIVE
Design Impact Thesis/

Theory of Change
Strategy
Impact Dimensions
This report is a first attempt to themes spread over five stages of setting
capture a baseline of the current the investment life cycle. While,
Governance & Culture
state of industry wide Impact this framework was used for the
Measurement and Management purpose of our analysis in this
[IMM] practices in India. report, it may also serve as a good
reference point for new impact
Our report is structured to analyse funds that are looking to integrate
THIS REPORT IS A FIRST the state of the IMM practices in IMM across all levels. Deal Screening
ATTEMPT TO CAPTURE India at two levels:
In addition, our report offers
A BASELINE OF THE Investee Buy-In and Deal Origination
Macro Level: framework(s) and practical Alignment to Impact Goals
CURRENT STATE OF suggestions based on best and Screening
INDUSTRY WIDE IMPACT Understand the overall industry- practices followed by a few funds Develop Framework and
Select Metrics
MEASUREMENT AND wide sentiment and perspective to tackle some of the complex IMM
MANAGEMENT [IMM] of the IMM practices in India and issues. These have been presented
PRACTICES IN INDIA. more specifically, gain insights into: in the form of case studies across
the report.
Progress and trends in IMM
We have consciously not Collect and
Challenges in IMM
considered categorisation of Impact Measure Data
Frequently used IMM the IMM insights by fund size, Management: Quality Control
frameworks and tools intent (impact vs market return), Measurement
investment type (equity vs debt), or and Analysis Analyse Data
Micro Level: Evaluate the investor’s investment stage and/or sector due
level of impact consideration and to a relatively smaller population
the IMM approach adopted across set of 26 founds.
the investment life cycle.
For the purposes of evaluating the

Communicating Impact
approach and practices adopted
at the micro level our starting Transparency and
point was the development of External Assurance Reporting
an IMM framework [Refer Figure
1] to identify impact across 15 Comparability
Learning and
Improvement
Attribution
Monitoring
and Exits Sustainability

2 METHODOLOGY 3 INTRODUCTION: GETTING TO KNOW IMM
We adopted survey method to develop DATA ACCURACY AND CODING The IFC defines impact investments still not a smooth sail. For long, the
insights and capture a broad industry as investments made in companies impact investing industry across the
THE SURVEY baseline in the report. The survey was All findings in this report are based on or organisations with the intent to globe had been grappling with lack
WAS carried out with 26 leading impact self-reported data by the respondents contribute measurable positive social of benchmarks and standards to
CARRIED OUT investors active in India through a which were captured either during the or environmental impact alongside a measure impact metrics, and it has
THROUGH series of virtual interviews conducted virtual interview or in writing through financial return. The three attributes remained one of the most debated
A SERIES between May and August 2020. Each validation of interview notes. Thus, that distinguish impact investors topics. While research and literature on
interview was followed by a written interview notes and responses for from other investors are: Intent, accountability and standards for IMM
OF VIRTUAL
validation of the responses provided multiple questions were based on a Contribution and Measurement practices continue to evolve investors
INTERVIEWS by the respondents. ‘free-flow’ approach. The research team have already started leveraging impact
CONDUCTED has recoded some of these responses What is IMM? data to make informed investment
BETWEEN A standard questionnaire comprising into more uniform categories or themes decisions.
MAY AND 32 questions was used for each to provide robust analyses and trends in IMM is the process of ‘measuring,
AUGUST 2020. interview. The questionnaire itself the report. Further, for the micro section, assessing and improving’ impact
was drafted after extensive secondary our respondents were requested to limit on people and the planet. IMM is an A survey conducted in South Africa showed revealed
research of international best responses specifically with respect to iterative process that helps investors that impact investors use impact data for:
practices, standards and principles on their impact investing portfolios. assess the nature and extent of the
IMM for Impact Investors impact generated by their portfolio (1) internal reflection, i.e. improving the existing strategy
and then apply the learnings to define and implementation to achieve desired outcome, and
INCLUSION CRITERIA and refine their investment strategy. (2) external communication to attract capital and build
stronger partnerships.
All survey respondents represent Why is IMM gaining traction in the
impact investing organisations current environment? Besides, evidence and Impact data help investors
with active debt or equity impact demonstrate the ‘impact’ in impact investments. It
investments in India. For the purposes The United Nations 2030 SDGs have helps reinstate the narrative of generating positive social
of this report, impact investments created a stir across the globe. As the and environmental impact alongside financial return.
means: market evolves to a more sustainable
future, investors are increasing their
“Investments made with the intention allocation to environmental and social
to generate positive, measurable social impact generating assets1. Like the global industry, the Indian
and environmental impact alongside a impact investing is faced with number
financial return” – GIIN To maximise their investment’s of challenges. A 2019 Brooking’s
List of participants are provided in impact potential investors have study revealed that 93% of the impact
Appendix 1. We have referred to all our increased their focus on integrating investing community in India measures
respondents as ‘fund(s)’ in the report. (impact) measurement and the impact, which seems to be good
management into their investment news. But the country faces a major
decision making. roadblock in the form of fragmented
practices to measure this impact.
IMM has its set of challenges, but is India doesn’t have any standard
being increasingly adopted benchmarks or credible baseline
data for impact measurement, which
Though an increasing number of makes it difficult to measure the
businesses are recognising the need actual impact in the country.
to measure their impact, IMM is
1
The GIIN ‘Annual Impact investor Survey 2020’ estimates the current market size of
impact investing industry at USD 715 billion.
Like the global industry, the Indian impact investing is faced with number of challenges. A 2019 Brooking’s study revealed that 93% of the impact investing
community in India measures the impact, which seems to be good news. But the country faces a major roadblock in the form of fragmented practices to
measure this impact. India doesn’t have any standard benchmarks or credible baseline data for impact measurement, which makes it difficult to measure the
actual impact in the country.
KPMG and IIC have attempted to develop a framework to analyse the structure and practices of IMM in India, which has been presented in this report

4 MACRO OVERVIEW: A BIRD’S EYE VIEW
I. Progress made so far for and the development of more

sophisticated tools and frameworks
The Indian impact investing industry and the use of advanced technology
has grown at a 26% CAGR over the in this domain. The Indian impact
last decade (CY2010–19)� As per a investment industry has also begun to
recent report released by IIC-Asha gain from these global developments.
Impact, the Indian industry has
crossed $10 billion� This surge in iii. Improvement in Transparency on
investment has led the industry to impact reporting:
make its way towards ‘quantifying
impact’� This trend is in line with one The use of advanced technology has
of the five trends identified in GIIN’s made data collection, measurement WHILE THE
latest report on the State of Impact and monitoring easier. This has IMPACT
Measurement And Management opened the doors for increased INVESTORS
Practice: While the impact investors interactions and more companies
PURSUE
pursue diverse impact objectives, they feeling confident to share their impact
universally agree on the importance DIVERSE IMPACT
reports in the public domain, in turn,
of measuring and managing impact leading to a gradual improvement in OBJECTIVES, THEY
results. transparency across the industry. UNIVERSALLY
AGREE ON THE
Business leaders are increasingly iv. Availability of skilled IMM IMPORTANCE
recognising the much-needed professionals: OF MEASURING
rigour of impact measurement and
management. In line with the GIIN
AND MANAGING
The string of positive changes has
findings, all the funds we spoke to led to proliferation in the number of
IMPACT RESULTS.
have unequivocally recognised the professionals with relevant skillsets.
progress made in this space, which However, there is a need to develop
can be summed into the following academic focus in this arena and
points: ensure that there is a consistent influx
of professionals to meet the growing
i. Increased awareness and research demand of the industry in India.
on IMM:
v. Significant improvement in LPs’/
Growing awareness and visibility of donors’ understanding of IMM:
IMM among the investor base has
given a boost to IMM-related research This has in turn led to an increase
and data� in awareness across stakeholders,
resulting in reduced friction. Though
ii. Development of IMM tools and the industry has shown agility and
frameworks: made good progress in terms of
understanding IMM, there continues
Across the world, IMM-related research to be a wide gap.
has been playing a role of a catalyst

II. However, key challenges persist i. Stakeholder requirements & One of the possible solutions to Globally, efforts are underway to
alignment: address this gap is to see if business address the comparability and
At a global level, GIIN in its 2019 report proxies can be used to estimate the benchmarking related challenges.
identified few major challenges The most important challenge faced impact generated and thereby align For example, to allow investors to
in IMM, including: ‘fragmented by the Indian industry is stakeholder them with standard metrics. Also, if aggregate and compare impact
approaches to IMM, ‘transparency alignment. Generally, it is difficult a direct correlation with capturing performance results, the GIIN
on impact performance, including to align all stakeholders, including relevant impact benefits and higher launched Evaluating Impact
targets and results’ and ‘integration LPs, GPs & investee companies, on probability of raising larger impact Performance in October 2019, the
of impact management and financial IMM. Further, IMM continues to capital is established, we believe, it industry’s first collaborative effort to
management decisions. be driven by LPs, who have varied would act as a good incentive for assess annualised impact performance
measurement criteria and mandates, entrepreneurs to focus on IMM. In results. The first two sectors featured
and this is not just confined to India, short, the market needs to incentivise in this family of reports are clean
but holds true across the globe. The impact disclosure practices better. energy access and housing. Through
IN ABSENCE OF ANY LEGAL respondents to the IMM survey in ongoing collaboration with advisors
DEFINITION, IMPACT HAS BEEN South Africa (mentioned in Section iii. Impact data from the GIIN’s Investors’ Council,
INTERPRETED IN A SUBJECTIVE MANNER 3 above) also resonated with this study participants, field-builders,
ACROSS THE INDUSTRY. sentiment. They observed that GPs 1: Availability, standardisation & and third-party sector experts,
have to request their investees for benchmarks: the GIIN developed an approach
different data points (on both breadth to rigorously and transparently
and depth parameters) to satisfy the At the outset, India lacks availability aggregate, contextualise and compare
Before we delve deeper into the Indian ‘reporting obligations’ to different LPs, investments’ impact.
of baseline data required to measure
purview of IMM-related challenges, it ‘creating an additional burden for the impact progress (e.g., types &
is important to highlight that many organisation’. quantum of waste being generated by
funds raised fundamental questions
region). Adding to this, many see lack
on what really constitutes impact According to industry experts, this A SIGNIFICANT AMOUNT OF DATA BEING
of standardisation of basic metrics and
and what are the criteria to qualify hurdle can be overcome by aligning its associated benchmarks even within
GENERATED IS QUALITATIVE. HOWEVER,
as an impact investor. In absence of the impact metrics at the LP level. a specific sector, a key challenge for GATHERING, ANALYSING AND VALIDATING
any legal definition, impact has been Though it’s easier said than done, IMM. Further, there is a need to not THIS TYPE OF DATASET IS A CHALLENGE.
interpreted in a subjective manner but if the industry can achieve this, only broaden the metrics beyond the
across the industry. In this context, it will be a significant step towards number of lives impacted so that it
impact washing is one of the major benchmarking and industry-wide covers structural impact, but it’s also
concerns at the industry level. While comparison on impact performance. Similarly, the World Benchmarking
imperative to have specific metrics
GIIN has defined core characteristics To begin with, the industry should, at Alliance (WBA) is an independent
across various stages of investing
of impact investing, which include a minimum, consider aligning impact industry body working with a wide
to drive better comparability. In
(a) intentionality to contribute metrics at a sectoral level. We have range of allies to develop evidence-
addition, B2B businesses face unique
measurable social or environmental discussed this in greater detail in our based benchmarks for investors in a
challenges of identifying target
benefits, (b) usage of evidence and section on Reporting. given industry, to track and compare
beneficiaries and hence the impact.
impact data in investment design, (c) with its peers a company’s impact
management of impact performance, ii. Business model vs Impact Thesis:
If we talk of the solution, the performance in terms of the UN
and (d) contribution towards the
government can support in building Sustainable Development Goals
overall growth of the industry, it is This is the second most common
baseline data. This can then be used (SDGs).
imperative for the industry to develop, challenge. While entrepreneurs can
within the Indian context, at least to compare the impact created
explain their business models, they 2: Qualitative vs quantitative:
a few guiding principles on what with the existing baseline. To enable
are not well-versed when it comes to
constitutes impact. comparison of impact performance
articulating their impact thesis. Thus, A significant amount of data being
across funds and investments,
although the business model itself generated is qualitative. However,
From an IMM perspective, the Indian one probable solution is industry
provides certain operating metrics gathering, analysing and validating
market faces several challenges that agreement on a minimum number
that inherently track beneficiaries’ this type of dataset is a challenge.
limit its progress. Some of these are: of sectoral level metrics. In the
progress, pure-play impact Also, equally challenging is the task of
following sections, we provide insights
measurement is not a routine activity conducting frequent surveys, which
for many. This is mainly because it’s relating to potential frameworks that
may also not be financially viable.
not cost effective for investees to can be leveraged to achieve such
For few funds, the quality (including
gather data beyond what’s already standardisation. However, even these
depth) of even the quantitative data
being collected. However, this may frameworks have their own limitations,
continues to be a key consideration.
change as investees build scale and
evolve.

For example, analysing the data Nature of Impact: Table 1 Overview of commonly used Impact measurement Frameworks
collected to see improvement in Trade-off between scale and depth
beneficiary’s life in a quantifiable way of impact in the short run: It is
Impact Target Impact Rating Impact Monetisation
is difficult. Technology has helped challenging to quantitatively estimate
address this challenge to a certain the depth of impact created in the Use Commonly used Slightly evolved framework, Least used framework due to
extent. Multiple Investors have now short term. Often, it takes significant framework owing more commonly used by the inherent complexity and
started leveraging automated digital time for positive social impact to to the simplicity of larger impact funds for subjectivity of the framework
tools to capture relevant data points realise. Hence, there is a trade-off, adoption deeper analysis
from impact beneficiaries on a wherein, if the fund goes for depth, it
Approach Captures the number Maps the investment on a Assess the monetary value
periodic basis. These data points help won’t have larger scale to showcase
of lives impacted numeric or a qualitative scale of impact generated using
measure impact progress and build a and if it goes for scale, then depth
(high, medium, low) basis methods like: Social return
robust database. becomes a question.
their performance on a variety on investment (SROI), benefit
of parameters (for example: cost ratio (BCR), social cost
Persistency of impact being
reach of impact, depth, benefit analysis (SCBA) and
generated over a longer term:
geography, any other aspect) economic rate of return (ERR)
MULTIPLE INVESTORS HAVE NOW Understanding how long the social
STARTED LEVERAGING AUTOMATED impact generated will last is a Source: IFC
DIGITAL TOOLS TO CAPTURE challenge in the real world owing to a
number of external factors, which are
RELEVANT DATA POINTS FROM IMPACT
beyond prediction.
BENEFICIARIES ON A PERIODIC BASIS. In our findings, we see about 60% the nature of their business model.
Difficulty in capturing negative of the funds leverage Impact Target The Rating framework, which takes
externalities: framework, which is often expressed into account both qualitative and
iv. Double counting: It is challenging to ascertain all the through some type/level of reach. One quantitative impact are used by some
negative externalities caused by the of the key reasons for higher adoption of our respondents and are highly
Attribution is a challenge, since many investment. of this framework is that it’s easier to evolved.
investments are clubbed deals or the embed into the business model of
same beneficiary in the same region Integration with financial investee companies. Although the Impact Monetisation
may experience intervention from management: framework is not popular due to its
other programme(s). Further, even There is a heightened need to Also, a limited number of funds complexity, there are a few funds who
at a fund level, it can lead to double integrate impact management with have developed a Scoring or Rating have either adopted it (8%) or are
counting, especially for those funds financial management. framework that systematically in the process of building their own
that end up focusing on specific assesses the investment opportunities, proprietary monetisation framework
sectors and geography where the III. Nevertheless, the industry investee company’s impact progress in addition to their existing Target
beneficiary is being served by its own continues to push the impact (post acquisition), as well as its overall framework.
multiple portfolio companies (e.g., agenda while applying an IMM portfolio. If we move to the more
MFI). framework that fits well with its established funds and debt funds, We have presented the Impact Rating
operating model. we find the adoption rate of the and Impact Monetisation frameworks
v. Other challenges: Rating framework is high, owing to through two case studies.
There are broadly three impact
In addition to these major issues, a measurement frameworks or Figure 2 Impact Measurement Framework used by Respondents (n=26)
few other prevalent IMM challenges ‘archetypes’ observed by the IFC
include: in its report. These frameworks are
developed in a way that they can be
Lack of market incentivisation: in-built into the investment life cycle
Larger eco-system, including LPs, — from strategy setting to monitoring. 34%
8%
do not adequately incentivise IMM. The frameworks are as follows:
A general feeling of commercial Target or Level of ‘Reach’
investors’ lack of interest in impact
measurement continues to exist. Rating or Scoring Framework
Monetory framework-like SROI
58%

IMPACT RATING FRAMEWORK IMPACT MONETISATION FRAMEWORK
CASE 1 Omidyar Network India (ONI) is simplicity but strives for insight. By
CASE
STUDY
2
STUDY a part of the Omidyar Group, a focusing on the end-customer, they Gray Ghost Ventures (GGV) is a the migration of the industry toward
diverse collection of companies, hope to make the process useful to pioneer of the global impact investing investors familiar with terms such as
organisations and initiatives, their entrepreneurs in serving their movement and continues to be Total Value to Paid-in Capital (TVPI), a
supported by philanthropists Pam customers better. As a part of the innovative in furthering its expansion. standard benchmark of performance
and Pierre Omidyar, founders of eBay. investment appraisal process for each
Omidyar Network India makes equity As one of the earliest private investors for private capital funds.
investment, ONI articulates the impact
investments in early-stage enterprises in microfinance, GGV seeks to
thesis, defines targets on specific
and provides grants to non-profits in eliminate poverty and strengthen Social Value of Paid-in Capital (SVPI)
impact indicators and identifies key
the areas of Digital Identity, Education, communities through catalytic, early- expresses the amount of societal
learning questions. These are unique
Emerging Tech, Financial Inclusion,
to every investee, based on the sector stage investments in the developing value created in underserved
Governance & Citizen Engagement and
Property Rights. in which they operate and their theory world by focusing on enabling communities per dollar invested into
of change. Additionally, they have technology, financial services, GGV’s impact fund. SVPI allows for
As an investment firm focused developed a unifying framework that and other products and services the aggregation of the positive net
on social impact, ONI believes it is seeks to measure direct impact and concentrated on enhancing the effects of its investment portfolio
imperative to measure the impact sector impact of each investee across
quality of life for large, underserved across a specific set of metrics. This
of their work. In their approach six dimensions (refer to flow chart
populations in emerging markets. factors in the five IMP dimensions
to measurement, ONI aims for below).
and provides a benchmark for impact
For impact measurement, GGV performance.
Impact sought a metric that resonated with
The parameters used to estimate monetary value of impact generated are :

Direct Impact Sector Impact Access to $Value of Enhanced
$Value of Time &
Impact of the products and services offered by investees on their Catalytic change spurred at the sector level, beyond end markets, information Productivity (through
own customers or beneficiaries beneficiaries of investees Cost Savings
and services Increased Income)
Follow-on
Reach Depth Imitators capital raised The total SVPI for portfolio is then
computed by dividing aggregate of
INVESTEE COMPANY: PROVIDER OF AN
Number of lives touched Quality of life improvement # of organizations that have
replicated the investee’s model
Capital and interest crowded-in
from other funders the $value of Impact generated by AFFORDABLE MOBILE NETWORK INFRASTRUCTURE
Contribution to the total $value of capital invested USING OPEN BTS TECHNOLOGY FOR RURAL AND
Inclusion impactful policies in the investee enterprise. This POOR COMMUNITIES
Socio-economic status of Extent to which the work o calculation is done for the entire
end-customers investees is contributing to
policy change
period they have invested in the Impact generated:
company until exit. If SVPI is say
80x, it implies that for every dollar Expanded the subscription of its voice and data
High
ONI then creates a snapshot of

investee performance across these six invested by GGV, $80 of impact was services to nearly 30,000 individuals in low-
Stratosphere/ dimensions of impact. It aggregates generated in that market. resource settings via its software-defined, affordable
Impact stars results obtained along these metrics mobile networks
across all investees to assess progress
The idea is to keep the model
at the level of their initiatives, strategic
simple and limit the number of Achieved a cumulative cost savings of say USD8.0
pillars and as an organisation as a
Sector-level Impact
whole, on an annual basis. metrics used to measure the $value million, as the cost of a call via investee company
Medium
of impact generated across the is significantly less than the alternatives in these
Cruising altitude parameters. GGV works with industry settings. .
ONI AGGREGATES RESULTS
and subject matter experts to make
OBTAINED ALONG THESE estimates of the monetary value of Facilitated $10 million in enhanced productivity
METRICS ACROSS ALL impact generated across portfolio among low-income and marginalised communities
INVESTEES TO ASSESS companies and sectors. Further, due to increased access to information and
PROGRESS AT THE LEVEL since the metrics are linked with communications technologies
Runway/
Taxiing OF THEIR INITIATIVES, the savings or increased income
that are related to specific investee’s SVPI: Social impact amounts to $18 million
STRATEGIC PILLARS AND AS AN
Low
products or services, it minimises contributed back to the communities in which it

ORGANISATION AS A WHOLE, the attribution risk as the changes operates. If the investors invested $5 million in
Low Medium High
ON AN ANNUAL BASIS. in circumstances do not materially the company, then SVPI for this investment would
Direct Impact be 3.6x
move the market metrics.

IV. While most funds have their own 4 of our respondents are also
APPLICATION OF NITI AAYOG’S SDG
proprietary measurement approach,
they do try to align it with the
signatories to the IFC’s Operating
Principles for Impact Investment
BASELINE REPORT TO MONITOR PORTFOLIO
CASE
STUDY
3
following principles and standards Management and few others are also LEVEL IMPACT
of measurement tools… considering adopting the principles.
Details of the IFC Operating principles
NITI Aayog has published two editions Rationale behind using the Niti
PRI, GRI, ESG, SDG, IRIS - often are available in Appendix 5
of the Sustainable Development Aayog SDG baseline report:
referred to as responsible investing
Goals (SDG) India Index, which Considering that Villgro’s investee
world’s alphabet soup - multiple tools, In response to the question on
comprehensively documents the enterprises create impact across
standards, principles and frameworks which elements should IMM
progress made by India’s states and multiple sectors (agri, ed, health,
have now been developed to aid consider, IMP’s five dimensions
union territories towards achieving energy) and geographies (within and
impact investors to measure and were explicitly mentioned only by a
the 2030 SDG targets. outside India), the team felt it is crucial
manage their impact. couple of fund. However, when
to look at impact data in a framework
we assessed the application
Progress is tracked on 100 indicators that’s contextual and accommodates
For reporting, the most commonly of these five dimensions
drawn from the Ministry of Statistics all sectors and geographies.
used is the United Nation’s from the fund’s IMM
and Programme Implementation’s
Sustainable Development perspective, we noted that
National Indicator Framework (NIF).
Goals (SDGs). SDGs have become most funds have directly or
The 2019 Index spans 16 out of 17
a common language in driving indirectly incorporated them
SDGs with a qualitative assessment Classification criteria based on SDG India
impact goals. Most funds have these into their investment life cycle. We will
on Goal 17. A composite score was Index score is as follows:
implicitly embedded into their have a detailed discussion on these
computed in the range of 0–100 (100
approach and are aware of the need dimensions in the following sections.
to drive progress in achieving these
being the highest) for each state/UT 0–49 50-64 65-99 100
based on its aggregate performance Aspirant Performer Front Runner Achiever
goals. NITI Aayog’s Baseline report on Finally, in terms of what metrics to
across 16 SDGs, indicating the
SDG rankings for states has raised the measure, IRIS+ clearly stood out as
average performance of every state/
visibility of SDGs in India. According the preferred system for measuring,
UT towards achieving 16 SDGs and
to the report, ‘India is fully committed managing and optimising the
their respective targets.
to achieving Global Goals within impact. We note that many
Classification criteria based on SDG Purpose: Measure the breadth impact
the specified timelines’. One of our funds have developed their
India Index score is as follows: across States, as well as serve as a
respondents has used the Baseline own proprietary systems
benchmark to push the investor and
report to monitor portfolio level for measurement, but they
Villgro is India’s oldest and one of portfolio companies to strengthen
impact. This has been presented in a have linked them directly or
the world’s largest social enterprise impact beneficiary reach, particularly
case study 3. indirectly to IRIS+ metrics. Having said
incubators. It has helped build in Aspirant and Performer states in
that, there is a clear recognition for
impactful, innovative and successful the long-term.
However, despite the enthusiasm the need for customisation of these
enterprises in agri-tech, clean-tech,
about SDGs, challenges pertaining metrics, owing to differences between
med-tech and employability through
to the very nature of the goals international and Indian context.
their impact investments. It uses the
continue to exist, as a lot of goals are
baseline report to monitor impact.
inter-connected so a multi-pronged Based on these findings, we believe
strategy is the need of the hour. that a combination of PRI, IMP
Methodology:
framework, SDG alignment and
A few funds leverage GRI’s IRIS+, albeit with modifications to
sustainability reporting standards. Indian context, can be a good starting Map each investee enterprise to 5 key SDGs
Track location/ geography
With its sustainability standards baseline within a particular sector to (SDG 3 Good Health and Well-Being, SDG 4
of end beneficiaries of investee
and frameworks, GRI helps various drive standardisation, comparability Quality Education, SDG 7 Affordable and Clean
enterprises’ products and
companies disclose sustainable and transparency. Even globally, GIIN Energy, SDG 8 Decent Work and Economic
services
information, inspires accountability in its IMM survey has highlighted Growth, SDG 2 Zero Hunger, Food Security)
and identify as well as manage risks. rising market cohesion around the
SDGs, IRIS+ and UNPRI. More on this in End Result – In-depth understanding of the
Cross-reference and align
For operating principles the UNPRI our section on ‘Reporting’ breadth of impact created by all portfolio
the above data with the ranking
appear to be the most common set of companies across the differently ranked
given to each State for that
principles adopted by many funds. PRI States (Achievers, Frontrunners, Performers &
respective SDG.
has a set of six principles, which broadly Aspirants) for 5 SDGs mentioned above.
takes into account the ESG-related
issues during investment analysis,
MORE ON THIS IN OUR
ownership and the disclosure process. SECTION ON ‘REPORTING

V. As the industry matures, it is Note that the IMM effort here is being
important to baseline industry’s looked at as financial resources spent
spend on IMM in monetary terms. specifically towards building the IMM
team or a % of time spent by investing
This effort has been quantif ied in professionals across the investment
terms of % of the fund’s operating life cycle and/or any consulting spend
budget. Considering most funds on specific measurement topics,
see IMM as a cost, it is interesting to baselining impact metrics, etc.
observe their spend on IMM-related While these are high-level estimates
activities. One key f inding has been provided by the funds, it is important
that, due to the internalisation of to make a note that impact is
impact, it is challenging for many generally embedded into the core of
funds to determine separate budget all functions, as well as through the
allocations for IMM. Further, for investment life cycle of the funds we
several funds, IMM capacity is interviewed.
integrated into the responsibilities
Interestingly, these results are not
of the investment team.
very different from global trends
identified by the GIIN. According to
We continue to see a wide spread
its findings, on an average, impact
of % IMM spend across the industry
investors spend an estimated 12% of
- between 5% and 15%, with almost
their organisation’s total budget on
equal number of respondents
IMM-related activities. Further 1/3rd
spending between 0 to 5%, 6% to 10%
of the staff at the impact investing
and 10% to 15%. Only one fund we
organisations is directly involved in
interviewed spends over 20% on its
IMM.
IMM framework.
VI. In Conclusion
Despite various challenges such as

Figure 3 Operational Budget Allocation on IMM (n=16)
lack of availability of baseline data,
standardisation and benchmarks,
as well as potential risk of double
35%
31% 31% counting, the Indian impact
investment industry continues to push
30% The IMM’s ‘Target’ framework
forward. Better alignment between
continues to be the most popular
25% fund and its investee companies
among funds; however, both Rating/
25% and recognition of the importance
of IMM within the LP community
Scoring framework and Monetisation THE IMM’S “TARGET” FRAMEWORK
are definitely the key drivers for its
frameworks are gaining acceptance CONTINUES TO BE THE MOST
20% with time. Since monetization
continued research and evolution. POPULAR AMONG FUNDS;
framework translates impact into
In fact, we see the challenge around HOWEVER, BOTH RATING/SCORING
15% ultimate returns, it has a higher
standardisation to get gradually
probability to gain significant traction
FRAMEWORK AND MONETISATION
addressed, since some of the global
if the ambiguity around assumptions FRAMEWORKS ARE GAINING
10% frameworks and metrics such as,
6% 6% is addressed. ACCEPTANCE WITH TIME.
IMP, SDGs and IRIS+ are gaining
5% prominence even in India.
Last but not the least, most funds
continue to have a direct spend of
0% a minimum of 5% of their operating
0-5% 6-10% 10-15% 16-20% Over 20% budget on IMM. With scale, stage of
investment and maturity, this spend is
expected to increase to 15–20%

5 MICRO OVERVIEW: DEEP DIVE
To effectively measure and manage impact, it practices of the participating funds through their
is important to have an IMM framework that investment life cycle. The survey questions were
runs across the life cycle of the fund, i.e., from drafted to understand each participant’s approach
intentionality to integration. In line with this across the 15 themes spanning 5 stages of the
need, we designed the below IMM framework investment lifecycle.
that attempts to evaluate the IMM approach and
Figure 4 IMM framework across the Investment Lifecycle
Design Impact Thesis/

Theory of Change
Strategy
setting Impact Dimensions
Governance & Culture
Deal Screening
Investee Buy-In and Deal Origination

Alignment to Impact Goals and Screening
Develop Framework and
Select Metrics
Collect and
Measure Data
Impact
Management – Quality Control
Measurement
and Analysis Analyse Data
Communicating Impact
Transparency and
External Assurance
Reporting
Comparability
Learning and
Improvement
Attribution
Monitoring
and Exits
Sustainability

STRATEGY
STAGE I: STRATEGY SETTING
SETTING Vince Lombardi once said, “Hope is

not a strategy”. So, to achieve their
Few funds we spoke to focus more
on formulating impact strategy at an
targets, impact investors don’t just investee level, basis their understanding
need to hope, but to also take the of the business model and scale potential.
first step towards formulating their This is perhaps driven by the need to not
impact strategies for the investment limit the type of impact as well as the
life cycle. And these impact strategies fund’s intention to make investments
Design need to be defined at multiple levels across multiple sectors.
Impact Thesis/ — such as organisational, portfolio and
investment levels. Further, as a part of
Theory of Change the strategy formulation process, the
funds ought to define impact goals
that are either grounded in evidence FUNDS FORMULATE A SOUND IMPACT
Impact or are based on a strong impact thesis. THESIS AT A FUND LEVEL, WHICH IS
Dimensions THEN CUSTOMISED FOR EVERY SECTOR
In this section, we will discuss how
AND INVESTEE
our respondents formulate different
aspects of their impact strategy, right
from designing and evaluating an
Governance impact thesis, defining impact goals 2. Impact Dimensions: What, Who,
& Culture at portfolio and investment levels, How Much, Contribution and Risk?
to setting a sound governance and
culture for the IMM process. Before we measure and assess
the impact, as a starting point, it is
1. Impact Thesis: How do funds important to define the key elements
formulate an investment strategy for of what constitutes impact. In this
impact investments? regard, Impact Management Project’s
(IMP) five impact dimensions (Who,
Impact thesis, which is a key part of What, How Much, Contribution and
the strategy formulation, is influenced Risk) provide clear guidelines on
by the fund’s impact objectives, what should be considered while
preferred stage of investment, developing an IMM approach.
impact sector(s), target population,
focus geographies and investment We discussed application of these
instruments. Most of our respondents five dimensions with the funds and
formulate a sound impact thesis at a observed that all funds directly or
funds level, which is then customised indirectly account for a few or all of
at a sector and investee level. these dimensions. A quick snapshot
of IMP and its five dimensions is
The fund-level impact strategy is provided in Appendix 4.
generally focused on specific themes,
such as improving lives of customers Let’s also understand how these
with average household income below dimensions can be applied at a fund
certain threshold and topical areas such level through the Leapfrog example
as financial inclusion. Where a fund is given in Exhibit 1. Leapfrog also
focused on a specific sector, the impact measures a number of outcome-level
thesis revolves around sector-specific effects at the company level and has a
interventions, such as delivering critical sophisticated measurement approach.
learning outcomes or improving the
average yield for the small farmers.

Exhibit 1 : Application of Five Dimensions of Impact at a Level Figure 5 Impact Dimensions evaluated in current IMM frameworks of Respondents (n=26)
Impact goal: The investment, tied to an innovative insurance product, will enable Leapfrog to provide
80 million people with healthcare and financial tools, 60 million of whom are Emerging Consumers, while
creating or supporting 40,000 jobs by 2029. Risk 20
Dimension Impact frame Indicators Contribution 15

What? Invest in businesses that address •#
and type of financial services companies
basic healthcare and financial •#
and type of healthcare companies How Much 25
services needs •#
/ type of essential
services enabled Who 26
— Financial services
— I n healthcare
(i.e., inpatient/outpatient care, pharma, What 26
diagnostics)
Who? “Emerging consumer” — •#

consumers served 0 5 10 15 20 25 30
individuals in sub-Saharan Africa, —# emerging consumers served
South Asia and Southeast Asia disaggregated by gender As expected, all our respondents were
whose daily per capita income •#
of first time users of financial services and comfortable in addressing the first While a large number of funds
is between $2.72 and $10.67 and healthcare three IMP dimensions, namely, What, struggle to measure and quantify the ALL OUR
MSMEs that employ between Who and How much. So, here we contribution dimension, a few funds RESPONDENTS
5-100 people have focused on the remaining two, we spoke to have adopted ways to WERE
Contribution & Risk, in detail. overcome this challenge. One fund we COMFORTABLE IN
How much, at 80 million people, 60 million •# consumers (individuals or MSMEs)
spoke to leverages mass scale customer
what rate? emerging consumers by 2029 — emerging consumers ADDRESSING THE
• Contribution: interview/survey tool to understand
— it healthcare consumers, % emerging
the impact on the quality of life on
FIRST THREE IMP
consumers
Funds find it difficult to measure the end-beneficiaries in relation to DIMENSIONS BUT
— it financial services consumers,
qualitative data. the contribution made by its portfolio STRUGGLE WITH
% emerging consumers
companies. Apart from this, there are MEASURING
• Net promoter score
All funds recognise the relevance other methods such as Randomised CONTRIBUTION
What is the Dollars leveraged directly and • $ leveraged and importance of the contribution Control Trial (RCTs), which can be AND RISK
investment’s indirectly— $3M toward $300M in dimension, as it’s crucial to link deployed, but they are expensive, posing
contribution? additional funding the investments they make to the additional challenges.
additionality they create for their
ultimate beneficiaries. However, • Risk:
as funds usually describe their
What risks? Underrepresentation/ •%
consumers from low- and lower-middle contribution qualitatively, it is difficult Assessing external risk in an
underservice of lower income income groups (note: this would already be to measure and quantify. investment thesis is as important
people collected as part of “who” above) as the return itself. For an impact
•E
SG compliance for transparency of product Funds look at contribution as fund, this risk has two components
terms, conditions and pricing, and client an impact on their immediate — risk of not achieving the return
data security and confidentiality beneficiaries, which are investee and the risk of impact outcomes not
companies. Hence, factors such as occurring as expected. Both these
Source: The Landscape of Impact Measurement for Impact Investing, Oxford Impact funding companies that are in or risks are covered thoroughly as a part
Measurement Programme servicing the needs of end-customers of the impact thesis at the time of
in backward district or being the ‘first’ investment consideration. Some of
funders are usually considered as part our respondents assess these risks
of the impact thesis. Read more on how at multiple levels, inter alia evidence
our respondents evaluate ‘Contribution’ risk, execution risk, alignment risk
in the following Micro Section II where and baseline risk. However, there is
we discuss additionality. one additional risk as stated under
IMP’s risk dimension that needs
Some funds have implemented to be considered — the risk of any
robust practices to quantify associated ancillary negative impact.
contribution.

Several funds face challenges in the above approaches, depending on (employees, investees and its LPs) are global findings, where 3/4th of the
evaluating ancillary negative impact the sector of investee or the stage of on the same page as well as motivated respondents said that their investment
and they try to assess it on a best- investee enterprise. to work towards the fund’s goals. This teams are intrinsically motivated.
effort basis. Robust market research is specifically important for investment
and/or end-beneficiary studies Early-stage impact funds that invest staff and impact teams, who play a key As a rule of thumb, impact goals/key
are crucial in capturing ancillary in innovative (especially tech-enabled) role throughout the investment life cycle: performance indicators (KPIs) are set
negative risks. In the absence of such business models rarely have actual deal screening, due diligence, impact at an overall portfolio or fund level and
studies many funds have adopted evidence of the product intervention performance, monitoring and impact not at an individual employee level.
the following proxy/alternative to draw analysis from. This is also the reporting. However, many of our respondents did
approach(es): case with investments in the new age say that they have an informal feedback
sectors such as Education-technology Through our survey, we tried to mechanism to measure employee
or Health-technology, where there are assess the practices adopted by the performance (for both financial and ‘IF THE
ESG due diligence
no precedents to draw evidence from. respondents to gain stakeholder buy impact performance) on a regular basis. ORGANISATION
doption of Net Promoter
A In such instances, our respondents –in OFFERS HIGH-
Score (NPS) methodology derive an impact thesis using one or • Staff training
POWERED
more of the following methods: • Employee incentive linked with
evelopment of strict exclusion
D INCENTIVES
Impact performance and goals In an impact-driven culture, it is
list (more relevant in case of debt FOR FINANCIAL
imperative that there is consistent
funds and portfolio companies) Leverage knowledge and
Financial incentives and employee learning and development, especially PERFORMANCE,
experience from investments in
ackground verification of the
B performance review linked with around IMM. Hence the Management DOES IT NEED TO
entrepreneurs other parts of the world
impact performance (pre and post) should organise adequate training BALANCE THESE
Perform secondary academic for investment staff is key to creating a for the staff on areas such as the
xplanation of customer protection
E WITH INCENTIVES
research by way of a literature holistic impact culture. organisation’s impact strategy, its
principles and terms to end- FOR IMPACT?’
beneficiaries review exercise impact goals, and how these goals
All (except two) of our respondents relate to employees’ day-to-day roles.
egal clause that ensures
L ake estimations based on
M
ALL OUR said that their annual employee
reduction of capital invested or exit investee’s plans to scale business
performance appraisal and In line with this, the majority of
RESPONDENTS if such risks are not controlled valuate follow-on capital decisions
E compensation are not linked to the our respondents said that they do
SAID THAT THEIR based on evidence from the first achievement of impact. The general undertake some form of training
IMPACT GOALS It is important to note that the risk round response is that impact is in the DNA initiatives to establish (and periodically
ARE EITHER mitigation would involve adding of the organisation and also in the core refresh) investment team’s knowledge
another dimension to the project to Some early-stage funds adopt a ‘logic
BACKED BY PAST value system of the staff. So, no separate of the fund’s impact thesis, impact
control any negative outcomes and framework’ approach to analyse the
EVIDENCE OR/AND hence it can become expensive to
incentives are required to motivate goals and measurement practices.
causal pathway and connections employees. This resonates with GIIN’s
ARE EVIDENCE- measure this for every investment. between inputs, outputs and
ABLE BASED ON A outcomes. They measure progress
LOGICAL IMPACT Impact Goal Setting – Strengthening towards outputs and validate Figure 6 Initiatives to educate staff on fund’s IMM practices (n=26)
THESIS. the foundation outcomes at discrete and strategic
moments in time.
While the IMP’s five impact
dimensions provide guidance on 3. Governance & Culture: How do the
formulating goals, the fund should funds manage stakeholder buy-in? 4%
make sure that there is ‘a credible
basis for achieving the impact goals A fund manager ultimately requires
through the investment strategy’ 1 stakeholder ‘buy-in’ to successfully Regular Formal Impact Training
achieve both its financial goals and
All our respondents said that their impact goals. So this makes it imperative 40% 56% Other Media used for Impact Education
impact goals are either backed by past that the fund manager undertakes
No Impact Training
evidence or/and are evidence-able steps to ‘codify’ the impact strategy and
based on a logical impact thesis. Few goals to ensure that its stakeholders
respondents use a combination of
[ IFC, a member of the World Bank Group, ‘INVESTING FOR IMPACT: Operating Principles for Impact Management’
1
(IFC, 2019), https://www.impactprinciples.org/principles.].

characteristics: global presence, and
large impact organisations with large
budget allocations for employee KEY FINDINGS OF
learning and development. THIS SECTION
The other respondents have more ad
hoc team discussions on impact on
different occasions, such as brown bag
lunch meetings or on-the-job training
during deal screening, performance
evaluation or preparation of impact
reports, etc. Though this is the current
practice, multiple respondents plan Out of the IMP’s five impact dimensions, most funds
to tweak this approach in the coming struggle to evaluate and quantify contribution and risk.
years, by putting together a formalised However, funds have attempted to develop solutions to
training calendar for their employees. address this complexity
Interaction with stakeholders
Governance & culture are also Many of our respondents are early-stage impact funds that
influenced by the way funds interact invest in innovative business models or in the new age
with their LPs. Most respondents tech-enabled sectors. Due to the lack of credible impact
shared that the level of interaction with evidence of these products, impact goals are often based
their investors/LPs varied from LP to on a sound impact thesis (rather than evidence) that is
LP. tested over time
SEVEN OF OUR RESPONDENTS RUN
EXTENSIVE FORMAL IMPACT TRAINING
Some funds noted that their LPs
PROGRAMMES, INTERNATIONAL conduct a robust due diligence
CONFERENCES AND KNOWLEDGE to gain confidence at the time of In line with global trends, impact funds consider staff
REFRESHERS FOR THEIR STAFF AT investment but are happy with periodic members to be intrinsically motivated to achieve impact
targets as a team and do not need to be separately
REGULAR INTERVALS. impact reporting post investment.
On the other hand, few respondents incentivised for achievement of impact outcomes
mentioned that their LPs follow a
A lot of these training initiatives are more hands-on approach by being in
driven by LP mandates or industry constant touch with them throughout
body led initiatives, such as by GIIN, the impact management life cycle. Impact funds and their investors are making efforts to
IFC, UN, IMP, etc. International DFIs Certain asset owners/ LPs track impact build a formal L&D system for IMM-related education
(as LPs) also lay strong emphasis on data and performance closely through:
staff training and education of their deal screening, impact goal setting,
investee staff. impact measurement and monitoring,
and impact reporting. Some of our The intrinsic culture of a fund is impact driven; hence,
Seven of our respondents run respondents’ LPs also work with the most funds do not have any employee incentives tied to
extensive formal impact training impact fund management to develop impact goals
programmes, international the Due Diligence report and ESG
conferences and knowledge refreshers Policy manual to ensure adherence.
for their staff at regular intervals. Here In fact, as mentioned above, LPs also
it’s important to note that all these invest in the learning and development
respondents have a few common needs of GP/ fund manager’s staff.

DEAL ORIGINATION
AND SCREENING
STAGE II:
DEAL ORIGINATION AND SCREENING
In the previous section, we an adverse effect on the impact

discussed the first stage of our performance of the portfolio. Funds
IMM life cycle framework, wherein should carefully formulate their impact
Develop Framework a fund formulates its overarching due diligence strategy, alongside
and Select Metrics impact strategy at a portfolio and their investment strategy, at an early
investment level. stage of the investment life cycle. An
impact due diligence helps the fund
Once the impact strategies are determine whether impact is built
in place, the next step is Deal into the potential investee’s business
Origination and Screening. This model and aligned with the fund’s
Deal Screening phase of our framework covers all

facets that occur prior to making
financial growth aspirations.
each investment and is critical to

impact investing, as it’s the ‘first and IN THIS SECTION, WE DISCUSS DUE
only opportunity’ for the investor to DILIGENCE APPROACHES ADOPTED
collect detailed financial, operational
Investee Buy-In BY OUR RESPONDENTS AND EXPLAIN
and impact-related data and
HOW THEY COLLABORATE WITH
and alignment to information of the potential investee.
This screening process is essential to THEIR INVESTEES TO SET IMPACT
impact goals make a sound investment decision. GOALS, SELECT IMPACT METRICS
AND MOTIVATE THEM TO ACHIEVE
In this section, we discuss due HIGHER IMPACT MILESTONES.
diligence approaches adopted by our
respondents and explain how they
collaborate with their investees to set
impact goals, select impact metrics All our survey participants collect data
and motivate them to achieve higher on impact of prospective investees
impact milestones. during the due diligence process.
While some funds stated that this data
1. Deal Screening: Going beyond collection and analysis is done as a
Financial Due Diligence part of the business due diligence or
ESG due diligence, others mentioned
A.Due Diligence that they have a standalone impact
due diligence process in place.
Impact Due Diligence is an important Irrespective of the approach, all our
component of the impact investment respondents recognise that an impact
life cycle. Shortcomings in the due due diligence is essential to evaluate
diligence process are bound to have and document the following:

impact and risk lens. As per the Approaches to Due Diligence ratings based on select filters. To
GIIN, ‘LPs essentially invest through illustrate, our respondents’ impact
fund primarily to manage their risk As per the Impact Due Diligence guide intake guideline questionnaires
and add value to their underlying published by the Pacific Community contain questions to assess:
Strategic Alignment:
Understand the potential investee’s investments in portfolio companies. Ventures, market research revealed
The fund’s role is to identify as many that approaches to impact due Sector of operation
impact strategy and assess alignment
of the impact of the investee with the risks upfront as possible and then diligence typically fall within three Geography
fund’s impact goals at the portfolio, to mitigate these risks through categories: Narratives of expected
Target group
sector and geographic focus levels. the structure of the investment’. impact, Due diligence questionnaires
Product pricing
In fact, some of our respondents’ and Quantitative tools.
LPs also work with the impact fund Sustainability
of impact
management to develop the due Basis our interviews, we observed that generated
diligence and ESG Policy manual to our survey respondents’ approach also Change
in quality of life/
ALL OUR SURVEY
ensure adherence. fell in one of these three categories. productivity due to investee
PARTICIPANTS product or service
COLLECT DATA I. Impact Narrative:
Impact Orientation: Enterprise-level
concerns: Intent,
ON IMPACT OF Evaluate among other factors, the Impact narratives are written governance, gender diversity,
PROSPECTIVE investee’s impact thesis and potential descriptions about current health and safety
INVESTEES to scale. Our respondents said that impact and expected impact
Additionality: performance of prospective investees.
DURING THE the process also provides insights This approach provides a more holistic
Identify ways in which the fund Our respondents using this approach and organised assessment of the
DUE DILIGENCE into qualitative aspects of investee’s
interventions such as inclusivity, can add value to the impact of usually do not conduct a sophisticated impact potential and orientation of
PROCESS an investee. This is by far the
quality of life change, ease of use and ‘impact due diligence’ but have a formal prospective investees. While in some
access to alternatives. most differentiating factor for an approach to understand the potential cases, these DDQs are standalone
‘impact investor’. The majority of investee’s impact strategy and assess documents, in others, they form a part
our respondents informed that alignment of the impact of the investee of the financial and business diligence.
’additionality’ is given strong with the fund’s impact goals.
consideration during deal screening III. Quantitative tools:
to ensure a strategic fit. However, II. Due Diligence Some of our respondents
non-monetary additionality is often Questionnaires: rely on Lean Data and other
Risk: hard to quantify or validate through “Impact-focused due diligence sophisticated proprietary
Identify and evaluate the anticipated robust data. questionnaires (DDQ) are tools to decode both qualitative and
(positive, negative, intended and sets of questions about prospective quantitative impact data about potential
unintended) impact(s) of the investee’s Due Diligence team investees’ impact that usually all investees into numeric scores and
product/service on all stakeholders. potential investees are required to ratings. This helps them take decisions
Some of our respondents evaluate risk In terms of allocation of staff for answer”. Many of our respondents use that are backed by comparability and
this by ensuring whether the right conducting impact due diligence, our an Impact-focused DDQ to evaluate objectivity. But there’s a catch. Design
product is offered to the desired target respondents follow varied approaches. prospective investees on multiple and use of these tools require resources
segment, terms of the product are For most of our respondents, impact parameters and assign scores/ and entail added costs.
explained properly, client protection impact due diligence is a more
principles are implemented and centrally coordinated effort where
the investment team is trained to Figure 7 Approaches to Impact Due Diligence [n=26]
customised products are being used
wherever needed. understand the impact parameters/
filters during the due diligence and
screening process. Few of them have
a dedicated impact committee/team,
which supports the ESG and main 23%
27%
investment team to screen potential
Impact Narrative
Alignment with LP Expectations: investments. One of our respondents
At this stage, LPs expect fund to also uses an external agency to Due Diligence Questionnaire
screen the investees through a strong conduct impact due diligence.
Due Diligence Tool
50%

ESG and Impact Assessment the firm brings in 'capital benefits' a formal framework wherein they Offering grants for Innovative
from follow-on investments such consider factors such as a potential impact-oriented programmes
Many of our respondents conduct as capital at lower cost (below investee’s ability to scale, reach,
impact due diligence as a part of market investments) or patient business goals, sector of operation, Providing additional
the ESG assessment. Without a capital with longer maturities geography and other contextual compensation for top and middle
doubt IMM practices should be built settings. Even in these cases, investees management on making progress
upon the foundation of good ESG are consulted to secure buy-in for against defined impact Key Result
governance. While it is a good practice Non-Monetary goals, but inputs are sought only up to Areas (KRAs)
MANY OF OUR to integrate one into another, impact a certain level.
RESPONDENTS funds should also understand the ccess to investment expertise,
A Considering marketing/promotion
CONDUCT IMPACT difference between Impact and ESG which helps grow the enterprise Out of our 26 respondents, 5 shared of investees in annual impact
due diligence. and enhance its social outcomes/ that they do not necessarily def ine
DUE DILIGENCE reports, press and other media for
impact beyond what would distinct ‘impact’ goals and strategy
AS A PART OF THE impact performance
ESG assessments typically focus on otherwise have occurred (separate f rom business goals) for
ESG ASSESSMENT. business practices — whether the their investees. This is primarily Establishing equity Incentivisation
WITHOUT A DOUBT enterprise has appropriate internal echnical assistance focussed
T because impact is core to their Schemes: Valuation adjustment
IMM PRACTICES policies and procedures that are on development of investee’s business model. These investors on achieving impact milestones.
SHOULD BE conducive to attaining modern operational and impact track their investees’ impact This form of incentivisation leads
environmental, social and governance management capabilities
BUILT UPON THE performance in sync with/against to lower dilution of equity stake
standards. On the other hand, impact
FOUNDATION due diligence also needs to include
the respective f inancial or business for entrepreneurs IN ADDITION
ringing in the fund's connections/
B KPIs and goals. These KPIs and goals
OF GOOD ESG extensive data and assessment on TO OFFERING
network to the investee company are in turn set in consultation with
GOVERNANCE. To make it a fair deal, the investors INCENTIVES
the impact outcomes of enterprises
the investee enterprises. also disincentivise their investees on a
’actions and products. dvocating for policy changes, to
A TO STAFF,
mission drift.
improve the enabling environment Incentives for investees INVESTORS OFTEN
B. Additionality for social enterprises and impact INCENTIVISE
investors alike In addition to offering incentives INVESTEES FOR
Similar to ‘Contribution’, 3. Develop Framework and Select
additionality is def ined as ‘whether
to staff, investors often incentivise Metrics: Setting the tone for ACHIEVING/
2. Investee Buy-In and Alignment to investees for achieving/exceeding
the fund’s investment increases the Impact Goals: How do impact funds
Measurement and Reporting EXCEEDING
impact goals. This could be monetary
quantity or quality of social output motivate investees? IMPACT GOALS.
or non-monetary. In addition to offering Our survey showed that while a lot of
beyond what would otherwise have
incentives to staff, investors often funds use their proprietary tools and
occurred’ — simply put, what are the Impact investors adopt a formal incentivise investees for achieving/ frameworks to capture impact data,
added benef its, if any, this particular methodology to assess the expected exceeding impact goals. Most of our these tools use generally accepted
fund brings in. Our respondents impact of a potential investment
respondents said that their investees standard metrics, ratings systems or
evaluate if they can provide and devise an impact plan with
are intrinsically motivated by impact. indices such as the IRIS Catalogue of
additionality through one or more measurable goals to ‘optimise future
of the following modalities: Metrics and IRIS+ Core Metric Sets.
impact performance’ for each investee.
Nonetheless, 12 out of our 26 The metrics capture impact outcomes
This approach enforces ‘quantitative
respondents provide some form of across the five IMP dimensions
rigour and accountability’ right
Monetary incentives to their investees. Here are and the most relevant metrics to
from the investment stage to the
some of the ways in which our respondents each investee are picked from the
performance monitoring stage.
ebt investors provide
D motivate their investee enterprises to proprietary tools/software.
additionality by being a first or achieve higher impact goals:
Almost all our respondents stated
second lender. This is usually that they work proactively and Most of our respondents said that
documented as a part of the Setting impact milestones in they use some standard metrics for
collaboratively with the potential
investor’s credit note order to receive follow-on capital measurement of impact performance
investees to agree on the impact
goals and strategy. Our respondents in each sector. Each investee has
inancing impact enterprises at
F feel this is essential to get a buy-in Including clauses in debt to report on these metrics, thereby
a stage that would not otherwise from investees at an early stage and covenants that provide for better ensuring comparability across the
be able to attract private set achievable targets. investment terms or interest portfolio. In addition, investors also
commercial capital subvention on achieving pre- decide on some customised/ bespoke
Only three of our respondents said defined impact targets metrics that are the best fit for each
e-risking the business for
D that their investment teams define investee. They closely work with
subsequent rounds of private the impact goals for their investees. Provisioning of donor capital on investees to select and prioritise
commercial capital: Investment in In such instances, the investors adopt meeting impact targets impact metrics.

Eventually, metric selection is guided
by existing evidence that was used
to formulate strategy, standards
available globally or basis the specific
IMPACT
impact targets.
MANAGEMENT :
KEY FINDINGS OF
THIS SECTION MEASUREMENT
AND ANALYSIS
A majority of the funds have embedded impact due
diligence as a part of the overall business due diligence
with investment teams trained to understand impact
parameters and filters
Common due diligence approaches adopted by funds

are– impact narrative, due-diligence questionnaire and
quantitative tools. More than 45% of the respondents have
adopted the due diligence questionnaire approach. Larger
Collect and
international funds tend to use sophisticated tech-enabled
tools for this purpose. Measure Data
Most funds consider additionality during the deal

screening stage: the value addition that they can bring
through their investment. While this may not be a deal
breaker for all, they do believe that their investment in the
firm brings in ‘capital benefits’ from follow on investments Quality Control
Almost all the impact investors work collaboratively

with prospective investee companies to develop impact
strategies and goals to ensure buy-in. Half of the funds
have tied investee-related incentives to such goals.
Analyse Data

STAGE III: IMPACT MANAGEMENT :
How often is the impact data and more cost effective over the years.
collected? Research and testing are underway to
MEASUREMENT AND ANALYSIS In tandem with the global research

further augment technology support
in using traditional impact data
findings, most of our respondents collection tools, to make the process
collect data on a quarterly basis cheaper and drive better insights.
In the previous section, we discussed 1. Collect and Measure Data: Who?
(~ 70%). However, third-party
the development of impact How? What?
organisations/consultants usually
measurement metrics/framework collect impact data for funds on an GENERALLY, THE INVESTEE COMPANY
and to what extent impact metrics are Who are the stakeholders
responsible for the 'impact' data
annual basis, as per their need and COLLECTS IMPACT DATA EITHER ON
customised. As we progress from there, requirement. Generally, the investee
collection? A MONTHLY OR QUARTERLY BASIS
the natural next step is to observe how company collects impact data either
impact investors manage to collect
AND THEN REPORTS DATA ON THE
on a monthly or quarterly basis and
quality 'impact' data on the standard
Impact data collection is a core, resource-
then reports data on the pre-decided
PRE-DECIDED IMPACT METRICS
AN IMPORTANT or customised metrics decided for each
exhaustive activity in the entire process of
impact metrics (standard/customised). (STANDARD/CUSTOMISED).
PART OF impact measurement and management
portfolio investment. The data reporting usually takes place
(IMM). A significant majority of our
THE IMPACT through an MIS. Most impact funds we
respondents shared that they ask their
MEASUREMENT An important part of the impact
investee (portfolio) companies to collect
interviewed seemed to have an MIS in From our interaction with various funds
PROCESS IS THE measurement process is the 'impact and report on impact data. Also, there
place to capture the impact data. operating in India, we understood that a
variety of tools are used for impact data
‘IMPACT DATA data collection'. To understand the are a few funds that leverage support
What tools are used for impact data collection. Most respondents said that
COLLECTION’. Indian impact investing industry from a third-party organisation or
perspective on impact data collection, collection? they do rely on ‘existing financial and
consultant to collect impact data. The
this discussion starts with who is operational data’ for impact data too. This
third-party organisation, in almost all
Around the globe, there has been a is primarily a factor of cost feasibility and
responsible for 'impact data collection', cases, supports the data collection
significant progress in the impact data to avoid duplication of efforts. Besides
then moves on to 'how frequently do process only for a part of the fund's
collection methodology. Thanks to this many also use survey method as a
they capture impact data' and finally portfolio. Only a negligible number of
funds collect the data themselves. advancement in technology, capturing tool for impact data collection.
culminates at 'what tools do they use'.
and reporting data has become easier
Figure 8 Stakeholders responsible for impact data collection (n=26) Figure 9 Different tools for impact data collection (n=26)
100%
92%
90%
80% Other Components 42%
70%
Existing financial/operational data used 50%
60%
50% Internal scorecards and dashboards 27%

40%
19% Predicting via existing evidence base 15%
30%
20% 15% Interview 23%

10%
0% Survey 42%
The fund does it themselves 0% 10% 20% 30% 40% 50% 60%
The investee company
They outsource it to third

Among the ‘other components’ in improve the overall effectiveness of Figure 11 Illustrative structure of an Impact oversight Committee established by Impact funds
the above graph, the majority of the IMM practice, ensuring that the
the funds that leverage third-party quality of impact data collected is
organisations’ support, such as use robust and relevant. Impact Oversight Committee Finance Team
‘lean data’ as a tool for data collection.
The ‘lean data’ tool uses a unique This is where a fund’s board of
technology that captures the voice directors come into picture. The
of customers/beneficiaries of the Information
board of directors can empower a Strategy Setting Research & Data Staff
portfolio companies. This technology Management Systems
committee or a director(s) to oversee
uses mobile phones that allow for text
impact performance. In a classic
messaging and also has other features
sense, the key roles the oversight
such as interactive voice response
committee or the director(s) has to Staff Staff Staff
(IVR). Alternatively, there are also
assume are as follows:
customer feedback tools such as PPI
THE ‘LEAN and Constituent Voice Survey, which
DATA’ TOOL also allow for efficient data collection. Overseeing the development of
USES A UNIQUE impact strategy
An impact oversight committee has a integrity. Our respondents, however,
TECHNOLOGY 2. Quality Control: How do funds defined set of roles and responsibilities added that they trust the quality of the
manage quality standards? Monitoring and reporting to the
THAT CAPTURES pertaining to impact-related activities. data collected and reported to them
board on the progress towards set Some of our respondents have these by the investee company. In situations
THE VOICE OF
Quality is a highly important parameter. impact targets/goals oversight 'teams' specifically working where they observe that there is a
CUSTOMERS/ To have effective quality control on the alongside the finance teams on: sudden or significant deviation from
BENEFICIARIES ground, some funds have dedicated Course correction and attention to the past trend, a ‘sense check’ is carried
OF THE professional(s), who either work any deviation from the prescribed/ Overall impact strategy and out to find the underlying cause. Over
PORTFOLIO alongside investment managers or pre-concluded plan goal setting 90% of our respondents, however, do not
COMPANIES. operate independently and manage conduct formal audit of the impact data.
impact assessment, monitoring and Research and data, which
A significant number of our survey
evaluation. This helps fund managers pays close attention to impact
respondents (roughly 50%) have
focus dedicatedly on the financial
established an impact committee measurement activities such as TO UNDERSTAND CRITICAL AND
aspects of the investment, without
for oversight, while some others data collection and data quality USEFUL INSIGHTS FROM THE IMPACT
worrying about the quality metrics..
have a separation of responsibilities DATA COLLECTED, DATA ASSESSMENT
within the board/investment Information management PROCESS HELPS FUND GET CLARITY
While the groundwork of this
system, which normalises the
parameter is taken care of by committee with respect to IMM. ON ‘WHAT WORKS AND WHAT
data collected and decides on the
professionals, there is also a need Among those who have an impact
reporting format, i.e., if the data
DOESN’T WORK, AND (HOW) ONE
for an oversight to ensure optimum oversight committee or separation CAN MONITOR TO SCALE UP’.
should be presented in a story or a
implementation of IMM-related of responsibilities, about 46% have
numeric format
responsibilities. Impact oversight helps comprehensive oversight duties.
It goes without saying that the

composition of the oversight team
is based on the size and affordability 3. Analyse Data: How often do funds
Figure 10 IMM Oversight Approaches adopted by Impact funds (n=26)
of the fund. The important point, examine and review impact data?
however, is more around ensuring
that there are specific responsibilities To understand critical and useful
around impact that are clearly laid insights from the impact data
out and enabled. collected, data assessment process
19%
helps funds get clarity on ‘what works
None Data Quality and what doesn’t work, and (how) one
39%
can monitor to scale up’.
Limited Most impact funds understand the
prominence and relevance of predefined In line with this, 95% (25 of 26) of
Comprehensive
data quality standards, ensuring our respondents assess the impact
transparent documentation and making data. However, the frequency of
42% appropriate disclosures to maintain data their assessment varies — monthly,

Figure 12 The chart represents % of funds that conduct impact assessment at varying time periods (n=19)1
KEY FINDINGS OF
THIS SECTION
Assessment undertaken at 5%
the time of exit only
Assessment undertaken annually 37%
Assessment undertaken at a higher

63%
frequency (eg.: quarterly)
0% 10% 20% 30% 40% 50% 60% 70%

Over 90% of the respondents request their investee
1
Data was provided by 19 of 25 respondents. companies to collect impact data on a quarterly basis
and upload it on their respective MIS
quarterly, bi-annually, annually and While we observe that the majority

at the time of exit. Most respondents of our respondents conduct impact
A few funds onboard third-party consultants/organisations
conduct the analysis at a higher assessment, and also see the global trend
to collect impact data for at least a part of their portfolio
f requency: monthly, quarterly or in a similar direction — where interest
bi-annually (about 60%). This impact in impact evaluation has significantly
data analysis can be conducted at increased — there is a parallel debate
three levels — select investee level, about limited public reporting of impact Existing financial and operational data is used by most
fund level and both. The majority data and lesser visibility on the data on respondents to observe impact generated. This is followed
of the respondents conduct the financial returns, which raise questions by other data collection tools such as surveys and
analyses at both the investee and on whether impact assessment is being interviews
fund levels. done to the fullest.
The majority of our respondents agree that if not

comprehensive, limited oversight is needed throughout
the impact measurement and management process
7
Frequent means monthly, quarterly or bi-annually

REPORTING STAGE IV: REPORTING
In this section, we have attempted Out of the 26 funds surveyed, 21 (~ 81%

to make an assessment of the funds prepare an impact report, while
approaches adopted by the impact 5 funds (~ 19%) are contemplating
funds to promote transparency and preparing one in the immediate
comparability in the industry. future.
This has been done through a review

of the reporting adopted by the funds, THROUGH A REVIEW OF THE AVAILABLE
understanding the importance the IMPACT REPORTS OF THE FUNDS, WE
funds assign to comparability or TOOK THE OPPORTUNITY TO DO SOME
benchmarking of their performance
DEEP DIVING INTO HOW THE INDIAN
to the industry performance and what
measures, if any, do they consider
IMPACT INDUSTRY IS CURRENTLY
Communicating to promote comparability, i.e., for REPORTING ON IMPACT PERFORMANCE.
Impact instance, consideration given to the
use of or alignment of their IMM
approaches to a global framework or
impact metric. We further tried to understand the
Transparency following aspects regarding the
and External 1. Communicating Impact: How Are reporting adopted by the 21 funds that
We Reporting? do prepare impact reports:
Assurance
Through our survey and through a vailability of Impact Reports:
A
review of the available impact reports Whether the impact reports are
Comparability of the funds, we took the opportunity

to do some deep diving into how the
available to the public at large or
are being made available only to a
Indian impact industry is currently limited set of stakeholders such as
reporting on impact performance. investors and donors?
Figure 13 Availability of Impact Reports (Limited vs. General) (n=21)
24%
Publicly available reports
Private - reports available to limited set

of stakeholders
76%
Frequency of the publicly available impact reports was noted to be largely annual, with a few funds
considering a biennial and/or longer duration for reporting on impact performance data
Note: The chart is based on data available for 21 funds i.e., for those who are currently preparing impact performance
reports and results.

The data shown in the figure 13 above is a clear indication of the increasing Table 2: Disclosure Themes and Narratives Covered in the Impact Report (n=16)
trend among the funds to push for transparency with respect to the impact
Disclosure Themes % Funds Illustrative narrative covered in the reports
performance with ~76% of the funds publishing their impact results for the public
at large (either through reports or through disclosure of the impact performance
on their websites)
Portfolio
Format of the reports:
63% Sector-wise split of portfolio focus
composition
Whether these are published as standalone impact reports or integrated as a
part of a larger financial report or annual report?
Of the funds that prepare impact reports (n=21), 67% of the fund publish a
standalone impact report, while 19% consider communication of the impact
through an integrated annual report and the balance 14%, present impact Impact Thesis
reports as per a LP /donor mandated format. and / or Impact Overall impact philosophy linked to the
44%
Measurement sectors, logic models and the theory of change
Approach
Figure 14 Format of the Impact Reports (n=21)
Being a cornerstone investor, investing in

LP / Donor Mandated format 14% Additionality &
12% remote geographies, attracting follow-on
Contribution
capital
Part of Annual Report 19%
Standalone Impact Report 67%
Exits undertaken and a narrative on the

0% 10% 20% 30% 40% 50% 60% 70%
Responsible Exit 19% continuation of the impact through mission-
aligned buyers
Note: The graph is based on data available for 21 funds i.e., for those currently preparing impact performance reports and
results.
The above trends are encouraging Identification of the SDGs contributed towards;
and highlight that many of the fund SDG alignment & however, many have only identified the SDG
managers are placing increasing 50%
mapping theme and not identified specific targets
emphasis on transparency and under the SDGs
disclosure of their impact results.
While one of the reasons can be
attributed to the growing awareness
among the LPs , many of the fund Quantitative direct output metrics supported
managers have also voluntarily started by anecdotal qualitative impact stories,
making such efforts. number of beneficiaries, type of beneficiaries.
Outputs 75%
Information disclosed skewed towards the

2. Transparency and External ‘reach’ rather than ‘depth’ of impact
Assurance
For the funds which are presenting

their impact results in the public 38%
Investors Investor Type Split and/or names of LPs
domain (~76% as per figure 13) we
reviewed the information provided
to better understand the disclosure
themes and narrative that is being
adopted by them. Our findings are Note: the above table only meant to outline the various aspects which are being disclosed and is not meant to comment
presented in Table 2 of this report. upon the rigour and depth of data being provided by the funds as part of their impact reporting.

3. Comparability: The Standardisation vs Customisation debate ….
The benchmarking of impact performance can be a key driver to put the impact
investing industry on a growth path.
However, unlike financial returns, comparing and benchmarking impact returns

is not an easy tread —rather it’s a knotted affair. The diversity of the investment
approaches and strategies across the varied sectors, industries and business
models within each sector render a standardised or a one-size-fits-all approach
extremely challenging.
Figure 15: Comparability will support the impact investment industry
Investors Asset Managers Investees

Benchmarking the Pursue impact in a Common frameworks
performance of the asset disciplined way — valuable and metrics can help
managers — enable information for improving reduce reporting burdens,
effective capital allocation investment decision and support performance
decisions impact performance management and
demonstrate the impact
External Audit of Impact

Performance
THE
One of the objective of our survey was to understand (a) whether the fund
managers view comparability or some form of benchmarking of impact
BENCHMARKING
As per our discussion with the fund performance as important for the industry growth and; (b) what elements of OF IMPACT
managers, most do not consider comparability are being presently considered in their impact measurement and PERFORMANCE
an external audit of the impact management process to promote a level of convergence. CAN BE A KEY
performance unless it is mandated by
DRIVER TO PUT
the investors or LPs. Presently, most The fund managers surveyed held a unanimous view that while comparability THE IMPACT
of the impact performance results are is important, it is not essential, largely also on account of it being difficult to
largely based on the self-reported data INVESTING
compare different investments across the diverse sectors. The viewpoints which
of the investee company coupled with emerged are reflected through a few comments below:
INDUSTRY ON A
“IT’S TIME TO TRUST some level of a sense check by the GROWTH PATH.
INVESTORS WHO fund managers.
SAY THEY ARE
CONTRIBUTING TO SUCH While many funds agreed that the
external assurance of the impact data
A BRIGHTER FUTURE –
will bring in credibility to the impact
BUT ALSO TO VERIFY IT”
reported, many also questioned “Comparability maybe “Comparability is good “Challenges not just
the trade-off between rigour of the more relevant for LPs and to have, but not a must in diversity of business
— DR. ANDREW reporting vs the cost of such audits. investors for allocating have given the challenges model, but also in
KUPER, FOUNDER AND There is no denying the fact that cost capital based on impact in benchmarking impact terms of the impact
CEO OF LEAPFROG might be a critical factor, but as the performance, while for performance” metrics on which the
INVESTMENTS impact investment industry groups, GPs, they have set impact investee company can
independent verification of impact targets to achieve and provide data, hamper
SOURCE: BUSINESSWIRE ARTICLE performance may be necessary to help should have the ability to “Possible consideration the possibility of driving
DATED SEPTEMBER 19, 2019 build transparency around the ‘true compare its own Y-O-Y can be given to driving greater standardisation
impact’ being reported. performance within these comparability of impact in impact performance”.
set impact targets” performance at a
sectoral level but may be
challenging”.

Exhibit 2 : Are we Ready for a Sectoral Level Benchmarking? Most fund managers agreed it comes to contextualising these
that the industry has covered at parameters for use in the Indian
The Global Impact Investing Network way. The study has been done for least some grounds in terms of scenario.
(GIIN) has undertaken a study, two sectors: Clean Energy Access & convergence at the global level, be
‘Evaluating Impact Performance’, to Affordable Housing — both sectors it in the form of adoption of impact We have presented below the two
present a new approach for rigorously which have a relatively long track measurement frameworks (GIIN or aspects being considered by the
comparing impact results among record of impact investing activity. Impact Management Project) and fund managers to promote a degree
investments within a sector, marking the impact metrics such as IRIS and of convergence or use of universal
an important first step in enabling The results of GIIN’s study on SDGs. However, many fund managers language.
investors to make these comparisons Affordable Housing Investments are felt that we are not there yet, when
in a meaningful and transparent summarised below:
WHAT creates the impact?

Example SDG Targets Impact Measurement Frameworks: Impact Metrics:
Example Target Impact Outcomes
Most funds are using the impact The majority of the fund managers
target or an impact rating archetype echoed the adoption of the United
Increasing resources available after housing
or a combination of both for their IMM. Nations SDGs and /or IRIS metrics as
payments, increasing residential stability,
By their very nature, such frameworks their way of promoting comparability.
improving housing quality, increasing accessible
may not promote comparability The UN SDGs emerged as the
housing services linked to supportive services,
of impact, as different investment universal anchor point for investors,
1.4 Access to 3.9 Reduce illness 11.1 Safe and decreasing environmental harm
types may have different targets, or while, use of IRIS metrics is being
basic service and deaths from affordable
housing have customised ratings developed. considered by many as an overall
As indicated earlier in the macro guidance, as there has been a need
section, limited fund managers have to contextualise these metrics to the
HOW MUCH impact has been achieved considered adopting a monetisation Indian scenario.
framework such as SROI.
Depth : Greenhouse gas emissions reduced
(metric ton), income distribution of tenants
Figure 16 : Global Impact Metrics being used by the Funds (n=26)

Breadth : Number of new units of housing
number of individuals housed, number of
jobs created WHO are the target stakeholders 1 (4%)
8 (31%)
Duration : Number of years for which Families, disabled individuals, elderly

housing is expected to remain affordable, individuals, individuals living near or below
tenant turnover rate, eviction rate national poverty line, racial, ethnic or religious
minorities, refugees or displaced individuals,
RISKS to creating Impact : Execution risk, youth and children, homeless individuals
external risk, drop-off risk, efficiency risk,
stakeholder participation risk
CONTRIBUTION to impact : Strategies

to contribute to their investment impact:
providing flexible capital, engaging actively
11 (42%) 6 (23%)
with their investees, and signaling that
impact matters
The GIIN study on Evaluating Impact Performance provides some evidence base that sectoral-level
Currently not
benchmarking can be a viable option to build convergence on the impact performance for an otherwise using any
fragmented industry. Through the analysis of the impact data gathered from several funds operating in globally aligned
metric
two specific sectors, it tries to identify an overarching common impact framework, targets and metrics.
Now, some may argue that there is a need for certain number and volume of deals in a particular sector
in India to provide enough data to undertake a similar exercise. However, due consideration should be
given to forming a sectoral-level taskforce at least in those sectors that are gaining traction, to build initial
frameworks in the formative years, which can evolve as the sector investments grow.

KEY FINDINGS OF
THIS SECTION
MONITORING
Majority of the respondents do prepare an impact report
(~ 81%) with others considering preparing an impact
report in the near future. Most impact funds are also
AND EXITS
promoting transparency by making their impact reports
available to the public at large
External audits of the impact reported is still largely

missing on account of the cost associated with such
audits
There is a unanimous view that while comparability is

important, it is not essential, largely also on account of it
being difficult to compare different investments across the
diverse sectors
Learning and
Improvement
The UN SDGs emerged as the universal anchor point

for investors for use in reporting. IRIS metrics is being
considered by many as an overall guidance only, due to the
need to contextualise these metrics to the Indian scenario
Attribution
Sustainability

STAGE V: MONITORING AND EXITS
1. Learning and Improvement: Our survey provides an understanding
Improving Impact through Feedback on how the Indian fund managers
Loops leverage the impact data generated
by their portfolio companies. The
While collection of quality impact majority of the data collected is used
data is critical for the industry, even to identify the gaps for supporting the
In this last section of our survey, impact during the investment term, more important is how and for what investee companies to improve their
we focused on understanding the impact investors need to also give purpose we are using the impact operational or business performance,
specific practices and feedback due consideration to putting in place data, i.e., our ability to analyse the as well as for enhancing the design of
loops that impact funds in India effective measures which support data and make effective use of the the products and services aligned to
are using to monitor the impact of the continuation of the impact after information to improve the business of the expectations of the beneficiaries
their investee companies, and key exit. This is also highlighted in the the investee company and thereby its for improved impact. This clearly
considerations for sustaining the GIIN Report on ‘Responsible Exits,’ impact performance. highlights the recognition that the
impact achieved post-exit. - it is the concern for the business Managing impact performance is funds place in the business value of
after exit which differentiates impact a continuous and iterative process, the impact data.
investors f rom investors without which requires embedding feedback
OUR REPORT IN THIS SECTION LAYS OUT an impact intent, whose primary loops through the life cycle of an However, it’s interesting to note
concern is to maximise financial
THE FINDINGS ON THE IMPORTANCE investment to incorporate the insights that impact did not inform the exit
returns for their shareholders and inputs from the stakeholders and decisions in terms of timing of exit for
ATTACHED BY IMPACT FUNDS IN INDIA TO and who are otherwise agnostic beneficiaries. most fund, which the funds managers
THE SUSTAINABILITY OF IMPACT AND KEY about “what happens to the exited concurred was a factor of market
CONSIDERATIONS THAT FORM A PART OF business”. timing and scale of enterprise.
THEIR EXIT STRATEGY TO ACHIEVE IT.
Our report in this section lays out
the findings on the importance
For an impact investor, tracking attached by impact funds in India to THE MAJORITY OF THE DATA COLLECTED
the progress of the impact over the the sustainability of impact and key
IS USED TO IDENTIFY THE GAPS FOR
term of the investment should be considerations that form a part of
as critical as tracking the financial their exit strategy to achieve it.
SUPPORTING THE INVESTEE COMPANIES
side. Apart from monitoring the TO IMPROVE THEIR OPERATIONAL OR
BUSINESS PERFORMANCE, AS WELL
AS FOR ENHANCING THE DESIGN
OF THE PRODUCTS AND SERVICES
ALIGNED TO THE EXPECTATIONS OF THE
BENEFICIARIES FOR IMPROVED IMPACT
Figure 17 Purpose for Which Impact Data is Used (n=26)
Improving overall impact management and

8%
investment process
Informing exit decision (timing) 4%
Both capacity building support for investee company

46%
and Improvement in investee products /services
Capacity building support for investee company 31%
Currently developing IMM framework – not applicable 12%
0% 10% 20% 30% 40% 50%

USING IMPACT DATA FOR IMPROVING CASE 4
MARKETING AND REVENUE GROWTH STUDY
The funds profiled clearly highlighted Impact data metrics can provide
the need to review their impact valuable market insights and data
Acumen created Lean Data to listen to positive impact on multiple metrics operational plans and capacities points about the customers and the
low income customers and understand such as confidence and peer-to-peer to stay on course. However, the beneficiaries (understanding customer
what impact means to them. By putting interaction frequency of the review differed context, socio-economic status,
the voice of the customer at the centre [Refer Figure 18]— the majority of the preferences for products and services),
of impact measurement and leveraging Willingness to pay for the service: funds follow an annual review of their which can go a long way in improving
mobile technology for fast, reliable Parents responded positively towards impact plans as a part of their larger the business practices of the investee
response, Lean Data has become an paying a slightly higher fee for a fund performance review. A few funds companies, ultimately resulting in
exciting new tool for social enterprises, product which will deliver better (~8%) undertake a more frequent business growth.
investors and beyond. Acumen has now outcomes for their children. While
spun off Lean Data into 60 decibels. the teachers were satisfied with the
product, it was found that the parents Figure 18: Frequency of Review of Impact Plans (n=26)
This case study is focused on a company
did not know that the increase in the
in the education sector that creates and
performance of the children was due
delivers capacity-building programmes
to the product of the company
for teachers in government and affordable Formal review structure under
15%
private schools. development
Net promoter score: Average NPS for
the company Review undertaken frequently
Scope of the study: A Lean Data study was 8%
– monthly or quarterly
undertaken to get feedback on customer
Acumen expected a high NPS for the
satisfaction from the parents and the teachers Review undertaken annually 73%
company considering the scores in other
about the capacity-building programmes for
parameters were relatively high. However
teachers developed by this company.
contrary to expectations, less than 20% of Review undertaken on need basis 4%
The results from Lean Data revealed the parents spoke about the effectiveness
the following: of the product and intervention with
0% 10% 20% 30% 40% 50% 60% 70% 80%
their relatives, neighbours and friends.
High depth of impact: Approximately The reason for the low NPS was the low
94% of the parents reported an awareness of the intervention among
improvement in the life of children parents. While the teachers were satisfied
since the intervention by the company with the product, the parents did not review, ranging from a monthly to a While a few funds interviewed do
know that the increase in the performance quarterly review supplemented with a recognise this fact, there is still a need
Personal growth and development: of the children was due to the product of comprehensive annual review, while, for an industry-wide awareness on
More than 85% of the parents reported the company. the balance (~4%) consider the review the business value embedded in the
of impact operational plans only on a impact data. This will support many
need basis or once in a few years. of the funds to view feedback loops
as a critical necessity and investment,
Action taken: The impact data was used by Learning: Parents like to rather than a mere cost for reporting
the company to take corrective measures be involved in knowing purposes.
and the immediate one being the increase about all aspects
in the number of interactions with the related to their child’s
parents through multiple channels. The education, including the
company started conducting Company products, interventions
Days at the end of academic years, which and initiatives, and as
is an annual fair with various competitions a result they are ready
being held for students. This helped to scale to pay more for their
the company’s visibility among parents. child’s development.

Exhibit 3 : Are we overestimating our impact? 2. The Attribution Conundrum Non-financial support: Apart from funding,

ATTRIBUTION: Determining which portion of results of an invested company or portfolio of companies is due to the many investors are also providing critical
activities of an investor (financial capital and non-financial value adding activities), taking into account other investors One of the bigger debates in impact non-financial support in the form of technical
and external factors that may have influenced the achievement of the results. measurement has been the challenge of assistance, capacity building, access to their
The below diagram provides an illustration of how impact results can be overstated without applying the attribution attribution of the impact results of the portfolio business network, which is also instrumental
principles
company, i.e., linking the final outcomes for the in the development and growth of the
beneficiaries to the provision of capital by the enterprise and should be factored in the
Asset Limited Impact Fund Investee Beneficiaries
Owners Partners Managers Companies investors. measurement.
100 Children Appropriate cost-effective methods:

Enrolled
While attribution is a difficult path to tread
While the use of experimental and quasi-
100 Children even for the portfolio companies, the challenge experimental methods, such as Randomised
Enrolled
is magnified as we move upward or along the Controlled Trials (RCTs), could be considered,
100 Children
Enrolled
impact capital supply chain, as the strength of the these are costly and time-consuming and
100
causal relationship goes down. This has led to over- not something that smaller funds can easily
300 Children
Enrolled 100 reporting the impact on an aggregated industry- adopt. It also triggers the debate around the
100 Children wide basis. trade-off between cost vs accuracy. Further to
100 Enrolled
500 Children be consistent and comparable, there is a need
Enrolled
200 Cognizant of the complexity associated with for the industry to consider an acceptable
attribution, one of the objectives of this survey was approach or framework.
200 100
100 Children
Enrolled
to understand the Fund managers’ views on this
500 While, the complexities in resolving this issue are
100 issue — is attribution even considered important
300 enough to be deliberated internally, even if no undeniable, there is still a need to recognise that
100 Children
Enrolled solutions have been adopted so far, or have the overcounting will obscure the actual impact and
100
funds pro-actively adopted some best practices progress towards the SDGs. There is a need for
100 the industry to work together to consider, at the
in an attempt to rationalise the impact being
minimum, some basic cost-effective standards
100 Children measured and reported?
Enrolled and approaches. For example, use pro-rated
approach over 100% of the impact being accounted,
It was encouraging to see that while all funds
where it is a finance-first investment or where the
1000 Children 1000 Children 800 Children 600 Children interviewed accept the significance of attributing
Enrolled Enrolled Enrolled Enrolled percentage of holding is below a certain threshold
the results to their investment, a few have also
(e.g., 10% of the total enterprise equity-implying
Source: Adapted from DCED Report (2017), Attribution in Results Measurement started adopting practices recognising the a higher influence of other investors), developing
attribution or the challenge associated with rules for manner of accounting for non-financial
Figure 19: Industry status on factoring attribution in impact it — ranging from a disclosure in their impact support, etc.
reporting to the use of methods such as
measuring impact proportional to the investment Although these may not yield impact results with
holding or experimental designs such as RCTs or a absolute accuracy but these can serve as a critical
Leapfrog Investments considers attribution to combination of both based on the type of portfolio. step towards negating an overzealous impact
19%
be critical for identifying and enhancing the reporting.
drivers of integrated returns. As an operational, Predictably, the larger skew of responses of
hands-on investor, LeapFrog undertakes a suite the funds was towards not having considered
of value creation activities at each investee attribution, and many echoed the following
company, prioritized on their ability to deliver practical challenges around measurement issues: THERE IS A NEED FOR
the dual goals of top tier returns and enabling THE INDUSTRY TO WORK
emerging consumers to be resilient through
TOGETHER TO CONSIDER,
81% financial and health tools. For each investment, Role of cornerstone funding or catalytic

the performance of the prioritized value creation
AT THE MINIMUM, SOME
funding: This is especially true of the seed
initiatives are tracked at a project delivery level BASIC COST-EFFECTIVE
investors and early-stage investors, where
as part of FIIRM, LeapFrog’s measurement investment in a promising idea or a start-up
STANDARDS AND
Not currently considering attribution of framework. The quantitative and qualitative
is integral to their impact thesis. A simple APPROACHES.
the fund’s impact results due to practical results provide LeapFrog insights that allow
attribution proportional to the holding or
difficulties in implementation for understanding the key levers that can be
stake in the company will fail to consider the
Attempting to consider attribution in attributed to the success of project and overall
catalytic role they have played in attracting
the fund’s impact results dual goals set as part of the investment strategy
additional financing.

Do we need a more holistic approach to responsible exit? To safeguard against a ‘mission drift’, the single most critical aspect that all funds
voiced is identifying an investor that is strategically aligned to the business model
The GIIN in its publication of Lasting Impact: The Need for Responsible Exits has of the company or that shares the impact motivations
identified that a responsible exit lays the foundation for a long-term impact and
requires considerations as early as due diligence. The study concluded that that
Figure 20 Stage at which funds give due consideration to responsible exit (n=26)
there is no single consensus approach to responsible exits, rather, impact investors
use a combination of one or more of approaches depending upon their investment
strategy, theory of change and role in the investment value chain. The study goes a
Not an active consideration 19%
step further to map the exit strategies adopted by the fund managers globally across
the life cycle of the investment.
Across all Stages 15%
At exit only 31%
During Investment and at Exit 12%
During Pre-Investment and Investment 4%
Pre-Investment Only 19%
Pre-Investment At the time of During At the time of exit

0% 5% 10% 15% 20% 25% 30% 35%
Selection of investment investment Timing of exit
investees based Inclusion of Instilling positive
on impact being appropriate clauses policies and Retaining investee Of the funds surveyed, 31% of the funds ‘Not an active consideration’ category includes funds wherein the
embedded in their on impact in the practices for the management considered the question of continuity instruments used are self-liquidating (debt funds and NBFCs) or those
business model or legal documents long-term of impact at the time of exit, ~ 19% of funds where the IMM is still evolving.
inextricably linked – anti-dilution, Selection of mission the funds considered it during the pre-
to financial success golden shares aligned buyer investment/due-diligence stage either
through investment in inherently
Founder’s Alignment with co- impactful enterprises or by ‘planning
commitment to investors their exits’ with a foresight on possible WHILE THE GREEN SHOOTS OF
mission
While several approaches were evidenced in the mission-aligned buyers. While buyer THE PRACTICE OF GIVING DUE
Structuring aspects selection was noted as a critical factor
such as holding
GIIN study, our survey revealed that most fund in CONSIDERATION TO RESPONSIBLE
India considered ‘selection of a mission-aligned for a responsible exit, except for a few
periods EXITS EARLY ON AND THROUGH THE
buyer’ as their key responsible exit strategy, fund, the majority did not recognise
impact as a driving consideration with DEAL CYCLE WERE EVIDENT IN OUR
giving consideration to it at the time of exit itself,
followed by ‘selection of investee companies respect to holding periods or timing of SURVEY WITH A FEW FUNDS, IT IS YET TO
whose business model is intrinsically impact their equity sale. BECOME A PRACTICE THAT IS STRONGLY
oriented’ at the pre-investment stage. INTEGRATED
It’s important to maintain the
momentum of the impact that has
been generated by the investors
3. Sustainability: Continuing the Impact through Responsible Exits during their investment tenure even
after their exit from the company. While the green shoots of the
Responsible exit strategies are critical for investors to sustain the impact of their While many funds give this due practice of giving due consideration
investee companies after they divest their stakes in the latter. This section of the consideration at the time of exit to responsible exits early on and
survey was focused on understanding the approaches being adopted by the fund itself, global research reflects how through the deal cycle were evident
managers in India to balance their liquidity targets, while ensuring long-term responsible exit philosophy should be in our survey with a few funds, it is yet
impact of their portfolio companies. integrated through the life cycle of the to become a practice that is strongly
investment — while sourcing the deal, integrated. As the Indian impact
Almost all fund interviewed in India recognised the importance of sustaining at the time of investment, during its industry evolves, so will its approach
the impact of their portfolio companies even after they exit. However, while a management or at its exit. towards responsible exits.
bouquet of varied approaches has been adopted globally for continued impact,
the majority of the funds in India have remained focused primarily on selection of
a ‘mission-aligned buyer’ as a part of their responsible exit strategy.

OIKOCREDIT’S RESPONSIBLE
CASE 5
EXIT APPROACH
STUDY KEY FINDINGS OF
THIS SECTION
Oikocredit is a social impact investor Timing the exit is a critical component
and a worldwide cooperative. It of Oikocredit’s Responsible Exit
has 45 years’ experience funding philosophy. Oikocredit adopts flexibility
organisations active in f inancial in their exit timing and considers an
inclusion, agriculture and renewable exit once they have fulfilled their role
energy. Oikocredit’s loans, equity asa growth stage investor. The impact funds interviewed do recognise the business
investments and capacity building value generated through the impact data and majority of
aim at enabling people with low Oikocredit considers a combination the respondents are leveraging impact data to improve the
incomes in Af rica, Asia and Latin of financial and social criteria while investee products and services and for capacity building of
America to sustainably improve selecting the right buyer. A cumulative their investee companies
their living standards. The company assessment is undertaken across the
f inances over 685 partners, with a following areas for the buyer selection:
total outstanding capital of over €1.1
billion (as at 31 March 2020).
For more information, visit
www.oikocredit.coop
While it is encouraging to see that all funds interviewed accept
Exclusion factors: the significance of attributing the results to their investment,
• KYC assessment of the buyer a few have also started applying some simple attribution rules
• Overall reputation of the buyer in practice from appropriate disclosures, to measuring impact
1
• Applicability of negative/exclusion list proportional to their investment holding or use of sophisticated
approaches like, RCTs
Criteria
Exclusion includes entities involved
in:
• Exploitative labour practices
Financial attractiveness: • AML
Fair value assessment to • Corruption
2
check the attractiveness • Money laundering, covered in “Selection of a mission-aligned buyer” emerged as the key
of the financial offer and Criteria sanctioned list responsible exit strategy for the funds with consideration being
our initial IRR expectations • Negative impacts: Business of given to it at the time of exit itself, followed by appropriate selection
of the investment alcoholic beverages, tobacco, of investee companies [business model being intrinsically impact
gambling, mining oriented] at the pre-investment stage
and wildlife
Mission Alignment: • Social and Cultural: Activities
3
Buyers who are committed involving degradation of critical
to the business plan and habitat, controversial fishing,
Criteria
mission of the investee uncertified forestry products
and who plan to grow the • Environment: Business of nuclear
company without materially power, unbounded asbestos, PCBs,
altering its business model hazardous chemicals
Strategic Fit: Strategic Fit: Buyers
Criteria 4 who can add strategic value to the

investee and are acceptable to the
management team of the investee.
Additionally, for exit in a case of
majority stake, Oikocredit strives
to understand the intentions of the
buyer in terms of investment horizon,
strategic goals and retention of
employees

Appendix A
Aavishkaar
Acumen
Ananya Finance
Ankur Capital
Asha Impact
Bharat Fund
Caspian
Chiratae Ventures
Ford Foundation
Gray Ghost Ventures
Gray Matters Capital
Incofin
Insitor Capital
Kaizenvest
KKR
Kois Invest
LeapFrog
MSDF
Northern Arc
Oiko Credit
Omidyar Network
Omnivore
TPG
True North
Villgro
Zephyr Peacock
Appendix B - References
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Henrich, Jess Pedersen, and Tom Sunderji, Sophia .2020 ‘Evaluating 2013. ‘A Critical Overview of Concepts Nations Development Programme
Woelfel. 2019. ‘The Impact Due Impact Performance’. The GIIN. and Practice’, 44. (UNDP)’. SDG Impact | United Nations
Diligence Guide’. Pacific Community Accessed 6 July 2020. https://thegiin. Development Programme (UNDP).
Reisman, Jane, Veronica Olazabal, Accessed 7 August 2020. https://
Ventures. org/research/publication/evaluating-
and Shawna Hoffman. 2018. ‘Putting sdgimpact.undp.org.
impact-performance.
Brett, Daniel, Justin Fier, Kristy the “Impact” in Impact Investing: The
Henrich, Jess Pedersen, and Tom IFC. 2019. ‘Creating Impact—The Rising Demand for Data and Evidence Vosmer, Willem, and Matthijs de
Woelfel. 2019. ‘Impact Due Diligence: Promise of Impact Investing’. of Social Outcomes’. American Journal Bruijn. 2017. ‘Attribution in Results
Emerging Best Practices’. Pacific https://www.ifc.org/wps/wcm/ of Evaluation 39 (3): 389–95. https://doi. Measurement: Rationale and Hurdles
Community Ventures. connect/Publications_EXT_Content/ org/10.1177/1098214018779141. for Impact Investors’. DCED. https://
IFC_External_Publication_Site/ www.enterprise-development.org/
Cayce, Brian. 2019. ‘Impact Investing: Schif, Hannah, and Hannah Dithrich. wp-content/uploads/DCED-Report-on-
Publications_Listing_Page/promise-of-
Toward Impact Consensus’. http:// 2018. ‘Lasting Impact: The Need Attribution-in-Results-Measurement-
impact-investing.
mydomain.com/. 2019. https://www. for Responsible Exits’. GIIN, USAID. for-Impact-Investors.pdf.
secf.org/BLOG/Articles-Administrator/ Impact Frontiers, Impact Management https://thegiin.org/assets/GIIN_
View/ArticleId/10892/Impact-Investing- Project. 2020. ‘Impact-Financial Responsible%20Exits_2018.pdf. ‘Unpacking the Impact in Impact
Toward-Impact-Consensus. Integration:A Handbook for Investors’. Investing (SSIR)’. n.d. Accessed 30 July
Simler, Claudia. 2019. ‘Impact 2020. https://ssir.org/articles/entry/
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articles/entry/the_power_of_lean_ Investors-Updated-July-14-2020.pdf. Standards for Private Equity Fund’. Do for You?’ 2017. Impact Alpha (blog).
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Julien. 2020. ‘Impact Oversight’.
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‘Creating an Impact Due Diligence Equity-Fund.pdf. tools-do-for-you-daec923a733d/.
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Framework’. Gary Community org/impact-oversight-2/.
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https://www.garycommunity.org/ Loveridge, Donna. n.d. ‘How to Use
article/creating-impact-due-diligence- Impact Management Project’s 5
framework. Dimensions of Impact with the DCED
Standard’, 4.
GIIN. 2018. ‘Conducting Due Diligence
| The GIIN’. 2018. https://thegiin.org/ Olazabal, Veronica, and Jane
conducting-due-diligence. Reisman. 2016. ‘Situating the Next
Generation of Impact Measurement
Bass, Rachel, Nova, Noshin Nova, and and Evaluation for Impact Investing’.
Sunderji, Sophia. 2019 ‘Evaluating The Rockefeller Foundation. https://
Impact Performance: Clean Energy www.rockefellerfoundation.org/report/
Access Investments’. GIIN situating-next-generation-impact-
Bass, Rachel, Nova, Noshin Nova, and measurement-evaluation-impact-
Sunderji, Sophia. 2019,‘Evaluating investing/.
Impact Performance: Housing’. GIIN. Podcasts, Global Focus, and India.
Bass, Rachel, Nova, Noshin Nova, n.d. ‘How Data-Driven Strategies Can
Dithrich, Hannah and Sunderji, Sophia Improve Impact Investing Outcomes’.
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and Management Practice, Second September 2020. https://knowledge.
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thegiin.org/research/publication/imm- driven-strategies-improve-impact-
survey-second-edition. investing/.

Appendix C - Glossary Appendix D
Assessing Impact Using IMP’s Five
Impact Dimensions
AUM Assets under Management
CAGR Compounded Annual Growth Rate The IMP provides a forum for building global consensus on how to measure,
CY Current Year manage and report impact. The IMP is a multi-stakeholder initiative to help investors
articulate impact expectations and communicate and manage their impact.
DFI Development Finance Institutions
ESG environmental, social, and governance After hundreds of in-person and virtual conversations across the IMP’s Practitioner
Community of over 2,000 organisations, the IMP reached consensus that impact can
GIIN Global Impact Investing Network be measured across five dimensions:
GIIRS Global Impact Investing Rating System
GIIN Global Impact Investing Network
GP General Partner
The IMP reached global consensus that impact can be measured across
GRI Global Reporting Initiative five dimensions: What, Who, How Much, Contribution and Risk
IFC International Finance Corporation Impact dimension Impact questions each dimension seeks to answer
IMM Impact Money Multiple

• What outcome is occurring in the period?
IMP Impact Management Project What • Is the outcome positive or negative?
• How important is the outcome to the people (or planet) experiencing them?
IRIS Impact Reporting and Investment Standards
IRR Internal Rate of Return • Who experiences the outcome?

Who • How underserved are the affected stakeholders in relation to the outcome?
KPI Key Performance Indicator
LP Limited Partner How Much • How much of the outcome is occurring - across scale, depth and duration?
MFI Micro Financial Institutions
NPS Net Promoter Score Contribution • Would this change likely have happened anyway?
OECD Organisation for Economic Co-operation and Development

Risk • What is the risk to people and planet that impact does not occur as expected?
PE Private Equity
Source: Impact Management Project
PRI Principles for Responsible Investing
RCT Randomised Control Trials
SASB Sustainable Accounting Standards Board Further, the IMP also developed a set of 15 categories of data that provides
information across these five dimensions. These impact data categories serve as a
SDGs Sustainable Development Goals guidance to enable enterprises and investors to set goals, assess performance and
SRI Socially Responsible Investing ensure that they are not missing any of the essential pieces for managing impact.
SROI Social Return on Investment
TOC Theory of Change
UN United Nations
VC Venture Capital
WBA World Benchmarking Alliance

OVERVIEW
Investing for Impact: Operating Principles In the text below, the term ‘investment’
Enterprises and investors can assess their impact performance
by assessing and reporting 15 categories of data Appendix E
for Impac t M an age me nt define an includes, but is not limited to, equity, debt,
Impact dimension Impact data category Description
end-to-end process. The elements of the credit enhancements, and guarantees. The
process are: strategy, origination and general term ‘Manager’ is used to refer to the
What
1. Outcome level in period The level of outcome experienced by the stakeholder when
engaging with the enterprise. The outcome can be positive or
IFC’s Operating Principles for Impact
structuring, portfolio management, exit, and asset manager, fund general partner, or
negative, intended or unintended.
Management
independent verification. Within each of institution responsible for managing
2. Outcome threshold The level of outcome that the stakeholder considers to be a these five main elements, the Principles have investments for impact. The term ‘each
positive outcome. Anything below this level is considered a
negative outcome. The outcome threshold can be a nationally or been defined by a heading, supplemented by investment’ may also refer to a program of
internationally-agreed standard. a short descriptive text. In total, the 9 investments. ‘Investee’ refers to the recipient
The IFC published the Operating elements are considered the key
3. Importance of outcome The stakeholder’s view of whether the outcome they experience is Principles (see Figure 1 below) that fall under of the funds from the Manager. For example,
to stakeholder important (relevant to other outcomes). Where possible, the people Principles for Impact Management building blocks for a robust impact
experiencing the outcome provides this data, although third party
these five main
(the Principles) elements
in 2019. are considered
The Principles the
management the recipient
system. may be a company or
The Principles
research may also be considered. For the environment, scientific key building
describe essentialblocks formanaging
features of a robust impact organization,
have been formulated based onfund,
two or other financial
research provides this view. impact investments. define an end- fundamental concepts:
management system. intermediary.
4. SDG or other global goal The Sustainable Development Goal target or other global goal that to-end process. The elements of the
the outcome relates to. An outcome might relate to more than one process are strategy, origination and (1) core elements of a robust impact
goal
The Principles have been formulated based
structuring, portfolio management, exit, management system; and
on two fundamental
and independent verification.concepts: (1) core
5. Stakeholder The type of stakeholder experiencing the outcome
Who elements of a robust impact management (2)transparency of signatories’
6. G
eographical boundary The geographical location where the stakeholder experiences the In total, the 9 Principles (see Figure alignment with the Principles.
social and/or environmental outcome system; and (2) transparency of signatories’
below) that fall under these five main
7. Outcome level at The level of outcome being experienced by the stakeholder prior to
alignment with the Principles.
baseline engaging with, or otherwise being affected by, the enterprise
Figure 18 The IFC Operating principles
8. S
takeholder Socio-demographic and/or behavioural characteristics and/ FIGURE 1
characteristics or ecosystem characteristics of the stakeholder to enable INVESTING FOR IMPACT: OPERATING PRINCIPLES FOR IMPACT MANAGEMENT
segmentation
9. Scale The number of individuals experiencing the outcome. When the

How Much planet is the stakeholder, this category is not relevant. Strategic Origination & Portfolio Impact at
10. Depth The degree of change experienced by the stakeholder. Depth is
Intent Structuring Management Exit
calculated by analysing the change that has occured between
the “Outcome level at baseline” (Who) and the “Outcome level in 1. Define strategic 3. Establish the 6. Monitor the 7. Conduct exits
period”’ (What). impact objective(s), Manager’s progress of each considering the
consistent with contribution to the investment effect on sustained
11. Duration The time period for which the stakeholder experiences the outcome the investment achievement of in achieving impact.
strategy. impact. impact against
12. Depth counterfactual The estimated degree of change that would have happened 8. Review, document,
Contribution expectations
anyway-without engaging with, or being affected by, the enterprise. 2. Manage strategic 4. Assess the and improve
and respond
impact on a expected decisions and
Performance of peer enterprises, industry or local benchmarks, and/ appropriately.
portfolio basis. impact of each processes based on
or stakeholder feedback are examples of counterfactuals that can be investment, based the achievement of
used to estimate the degree of change likely to occur anyway for the on a systematic impact and lessons
stakeholder. approach. learned.
13. Duration counterfactual The estimated time period that the outcome would have lasted for 5. Assess, address, monitor, and manage potential
anyway -without engaging with, or being affected by, the enterprise. negative impacts of each investment.
Performance of peer enterprises, industry or local benchmarks,
and/or stakeholder feedback are examples of counterfactuals that
can be used to estimate the duration likely to occur anyway for the
stakeholder. Independent Verification
Risk 14. Risk type The type of risk that may undermine the delivery of the expected
impact for people and/or the planet. There are nine types of impact 9. Publicly disclose alignment with the Principles and provide regular independent verification of the
risk. alignment.
15. Risk level The level of risk, assessed by combining the likelihood of the risk
occuring, and the severity of the consequences for people and/or the
planet if it does.
Source: Impact Management Project
PAGE 2
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IMPACT MEASUREMENT

AND MANAGEMENT IN INDIA

State of IMM in India 1

1. Scope and Objective of the Report������������������������������������������������������������������������������09

3. Introduction: Getting to know IMM������������������������������������������������������������������������������� 13

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Impact Measurement and Management (IMM) is the ‘cornerstone’ of impact

Impact Investors Council (IIC) and KPMG undertook an industry-wide survey of

Overall there has been a significant improvement in investor’s understanding

A majority of impact investors use sophisticated proprietary tech-enabled

Although there is a need to standardize metrics for comparability, there are

Ramraj Pai Santhosh Jayaram

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Impact target framework

Some of the global approaches

The industry spend on IMM appears

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STAGE I: STRATEGY SETTING STAGE IV: REPORTING

STAGE II: DEAL ORIGINATION AND SCREENING

Most impact investors have embedded impact due

Design Impact Thesis/

For the purposes of evaluating the

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I. Progress made so far for and the development of more

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Monetory framework-like SROI

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The parameters used to estimate monetary value of impact generated are :

ONI then creates a snapshot of

products or services, it minimises contributed back to the communities in which it

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Despite various challenges such as

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Figure 4 IMM framework across the Investment Lifecycle

Design Impact Thesis/

Governance & Culture

Investee Buy-In and Deal Origination

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SETTING Vince Lombardi once said, “Hope is

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Dimension Impact frame Indicators Contribution 15

Who? “Emerging consumer” — •#

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(IFC, 2019), https://www.impactprinciples.org/principles.].

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Interaction with stakeholders

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In the previous section, we an adverse effect on the impact

Deal Screening phase of our framework covers all

each investment and is critical to

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Common due diligence approaches adopted by funds

Most funds consider additionality during the deal

Almost all the impact investors work collaboratively

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MEASUREMENT AND ANALYSIS In tandem with the global research

50% Internal scorecards and dashboards 27%

20% 15% Interview 23%

1. Scope and Objective of the Report��09

3. Introduction: Getting to know IMM�� 13

Most impact investors have embedded impact due

Duration : Number of years for which Families, disabled individuals, elderly

CONTRIBUTION to impact : Strategies