Commonfund Institute's Principles of Investment Stewardship guide recommends that nonprofit institutions measure a mission-aligned portfolio on two dimensions simultaneously — financial performance and impact performance — using internationally recognized frameworks rather than relying solely on manager self-reporting, because each dimension answers a question the other cannot.
Impact measurement begins with the Theory of Change established in the Investment Policy Statement, which should define specific outcomes, timeframes, and measurement methods before capital is deployed. Three frameworks provide the standardized tools:
The Impact Management Project (IMP) Five Dimensions of Impact is the analytical framework for data measurement — what outcome occurs, who experiences it, how much, the investor's contribution, and the risk that impact differs from expectation.
The Operating Principles for Impact Management (OPIM) address organizational workflow. Using IMP and OPIM together is optimal, because each addresses what the other does not.
IRIS+, the generally accepted impact accounting system maintained by the GIIN, provides a free catalog of quantitative and qualitative metrics against which outcomes can be benchmarked.
Two practices make the framework credible in use. Manager-reported impact data should be supplemented where possible by independent analytics and third-party verification. And impact reporting should acknowledge failures and shortfalls as well as successes — institutions that report only positive impact outcomes are almost certainly not measuring rigorously.
For clients, Commonfund uses a mission-aligned investing process that assists boards of trustees and investment committees to articulate the parameters for measurement of those objectives.
