This report explores the importance of measuring the impact of investing activities, particularly in the increasingly popular field of impact investing. The report suggests that investors should broaden their focus beyond ESG and impact investing, by incorporating social and environmental outcomes as part of a broader investment strategy. This is increasingly true for investors with shorter time horizons. The report also highlights the need for transparent and clear impact data to inform investors and eliminate any appearance of impact-washing.

Taxonomies and frameworks for impact awareness are still needed, but there has been significant progress in developing these frameworks. Efforts such as the European Sustainable Taxonomy and the Sustainable Development Goals (SDG) can serve as impact awareness frameworks for investors. However, investors need more quality data to measure the impact of their investments accurately. The report highlights the evolution of the environmental, social and governance (ESG) data landscape and the emergence of new vendors using artificial intelligence, machine learning, and natural language processing to offer near-real-time insights into ESG performance.

The report also discusses the importance of measuring a company’s impact and how doing so can contribute to mainstream ideas of market growth and mispricing. The report recommends that investors adopt a hybrid approach that combines data from vendors and companies’ reported business activities aligned to SDGs. It also suggests that investors build deeper impact awareness based on evidence that these translate to financial impact, aligning with certain end-goals that provide positive social and environmental outcomes, and investing in solutions that address material risks and opportunities for investors and businesses.

The report concludes by calling for greater impact transparency to improve the quality of impact data and to eliminate impact-washing that could potentially taint ESG. It highlights the need for impact data standards and compares the present situation to that of financial accounting in the 1930s, where critics initially lambasted the idea of generalized accounting rules. The report notes that standardised impact data is the next frontier in sustainable finance, and as such, will require continued collaboration among policymakers, companies, and investors to develop a robust and reliable system that measures social and environmental impact accurately.