What is impact investing?
Impact investing starts with the result you intend to create, not a label added after the investment. The Global Impact Investing Network identifies four core practices: set that intention, use evidence and data when designing the investment, manage performance against the intention, and share methods and lessons with the field. A financial return and a measurable positive outcome are both part of the proposition.
The outcome is the change experienced by people or the planet. Capital committed or farmers enrolled is an input or output, not proof of change. An investor may track VND of farm income, tonnes of waste avoided, or hectares restored, with the unit, baseline, target, period, and affected population defined before approval.
Why does impact investing matter to you?
An impact fund, development finance institution, family office, or bank may ask your company for an impact thesis, baseline, and target during due diligence. Its investment committee needs to know what will change, for whom, by when, the investor's expected contribution, what could prevent the result, and which source records support the starting point.
Your financial model still has to support the expected return. The impact case sits beside it and can affect approval, investment terms, board reporting, and follow-on capital. If the metric definition, data owner, and reporting frequency are not agreed before closing, your team may later be asked to recreate a baseline it never recorded.
How does impact investing work?
Before capital is committed, the investor writes a theory of change that links its capital and planned actions to the intended outcome. Operating Principles for Impact Management Principle 4 asks what the intended impact is, who experiences it, how significant it is, and how likely it is to occur. It also asks for the main risks and evidence about the size of the problem in the target geography.
The investment documents then define each metric, baseline, target, data source, collection frequency, responsible person, and report recipient. Principle 5 covers potential negative impacts. Principle 6 uses the same results framework to compare actual performance with the original expectation and requires an appropriate response when the outcome is no longer likely.
What mistakes should you avoid?
- Adding an impact claim after the investment decision instead of recording the intention before approval.
- Counting outputs, such as people enrolled or equipment installed, as outcomes without measuring what changed for people or the planet.
- Reporting only positive indicators while ignoring adverse effects, weak data, or the risk that the outcome would have happened without the investment.
- Collecting annual figures without comparing them with the baseline and target or deciding what to do when performance falls short.
Is impact investing the same as responsible investing?
No. Responsible investing is wider and may use environmental, social, and governance information to protect financial value. Impact investing requires an intended, measurable positive outcome alongside a financial return.
What will an impact investor ask your company to provide?
Prepare a short impact thesis stating the intended result and a theory of change linking the investment and planned actions to that result. Include the baseline file, dated target, metric definitions, calculation method, source records, reporting calendar, named data owners, and a log of possible negative effects. Keep the impact measures separate from the financial forecast, but show who reviews both and which decisions each measure can change.
Does an unintended positive result make an investment impact investing?
No. Under the GIIN's first core characteristic, the intention must exist when the investment is designed. A later positive result can still be measured and reported, but it does not by itself turn the original decision into impact investing.