The impact investing sector does not suffer from a lack of measurement. Quite the opposite. Investors have never had more scorecards, indicators, dashboards, and reporting frameworks. Yet despite all this activity, a fundamental question often goes unanswered: Are we really understanding our impact?
Measuring activity is important. But it isn’t impact.
Output metrics—such as dollars invested, projects supported, equipment installed, or partnerships established—show what was delivered. They help investors manage portfolios, report to boards, and maintain accountability.
As scrutiny of ESG and impact claims increases, investors must demonstrate more than their outputs. They need credible evidence of the real-world outcomes of their investments, including what they learned when results differed from expectations.
Treating activity as evidence of impact weakens decision-making and credibility.
At TAF, the key outcome metric is annual greenhouse gas emissions reduced or avoided. This is produced by considering outputs, for example, the number of building retrofits and the equipment installed or the number of ICE vehicles displaced and charging stations connected. We also consider other desirable co-occurring outcomes related to economic and health benefits, improved equity, and community inclusion.
A simple way to distinguish an output from an outcome is the “so what?” test. Planting 1,000 trees is an output. If 50% survive and each sequesters 15 kg of CO₂ per year on average, the annual reduction of approximately 7,500 kg of CO₂ is an outcome. The example shows why both levels matter: outputs confirm what was delivered, while outcomes show what changed. Impact goes further still, describing longer-term systemic shifts.
Climate solutions happen in systems, not silos
Disruptive climate solutions rarely come from a single investment. Nor do they come from an organization acting alone. Change depends on systems. That is, effort across government, community, and businesses working together over many years. So it isn’t reasonable for one investor to claim sole credit or suggest their investment achieved an impact result.
This is why contribution matters
Instead of starting with the question, “what impact did we create?” we’re asking “what role did we play in enabling the impact?” This may seem like a subtle shift, but it reveals a new picture. Instead of trying to demonstrate causality and risk overstatements about certainty, we’re assessing the strength and plausibility of our contribution.
The question we don’t ask often enough
Additionality is arguably one of the most important concepts in impact investing. It asks a simple question:
Would the outcome have happened anyway?
For example, one investor finances a climate solution that cannot readily access conventional capital because of technology, market, or execution risks. Another investor funds a mature climate opportunity with strong demand and abundant financing options. Both investments may generate environmental benefits, but the first likely wouldn’t happen organically and needed the investor, the second did not.
This is why TAF considers whether our capital will reach sectors or opportunities where investment is otherwise scarce – where change is less likely to happen. We prioritize additionality. A recent article in Stanford Social Innovation Review takes the concept even further. The author suggests that when impact investors seek to transform a market, we should not just think about capital scarcity but also ask whether the investment has the ability to change the conditions that made capital difficult to secure in the first place.
Without additionality, impact measurement risks being just a record of participation.
Investors measure “potential” better than “actual”
One of impact investing’s most consequential gaps appears between due diligence and evaluation. Before investing, organizations may spend months estimating emissions reductions, forecasting social benefits, and mapping pathways to create markets. Those projections can shape whether capital is deployed. Yet after an investment matures, exits, or reaches a meaningful milestone, many organizations spend far less time testing whether the assumptions behind those projections were correct.
- Did the anticipated outcomes materialize?
- Did barriers to adoption actually decline?
- Did the investment mobilize additional capital, influence behaviour, or accelerate progress that would not otherwise have occurred?
Too often, we know more about the impact we expected to achieve than the actual outcomes. For a sector built on the premise that capital can drive positive change, this should concern us.
Transitioning from reporting to learning
Tracking operational performance and accountability metrics remains essential. But, impact reporting should add a disciplined feedback loop: compare expected outcomes with actual results, test which assumptions held, and examine what the evidence means for future decisions. This implies using reporting as the start of inquiry, not the end. Apply what you learn—including where results fell short—to improve the next investment decision. This is how impact measurement can help direct capital toward the low-carbon, equitable future we are working to build.
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