Key takeaways
If I had to give a short answer, I would say:
- Two prevailing philosophies on Impact:
- Measuring outcomes vs. being present where Impact occurs
- Less than half of LPs investing in Impact measure it, largely due to reliance on GPs’ reporting
The survey conducted by Pitchbook in Q2’23 focused on two dominant Impact philosophies. One emphasizes the importance of measuring outcomes, while the other believes that merely being present in impactful areas suffices.
Impact Philosophies and Their Prevalence
A deeper dive into understanding the practitioners’ stance on this spectrum was intriguing:
A significant 46% of all Impact investors acknowledged that they aim for both financial and socio-environmental returns but currently don’t measure the Impact. This trend was more pronounced among LP respondents, with 59% not measuring Impact, compared to 46% of GPs.
The LPs’ position is often influenced by the GPs’ reporting, leading to a lack of standardized measurement.
GPs’ Alignment with Impact Investors’ Expectations
Exploring the alignment between GPs and Impact investors, the interviewing team asked allocators and advisors about the significance of asset managers measuring socio-environmental impact.
Interestingly, 20% of LPs with an Impact program deemed this as slightly important or not important at all. This aligns with the 46% of GPs with Impact strategies who don’t measure their investments’ impact.
However, a majority of LPs (over 50%) expressed a preference for their managers to measure impact. Specifically, 26% considered it extremely important, while 34% found it very important.
Conclusion
While there’s a clear divide in the Impact community about the importance of measuring outcomes, the trend leans towards a growing emphasis on tangible impact measurement.
However, the challenges faced by LPs, especially in aligning with GPs’ reporting frameworks, highlight the complexities of standardizing Impact assessment.
