How do you measure “investor impact”?

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– A guide identifies six different mechanisms of investor impact, assigning a level of evidence that indicates how certain we can be that it actually works.
– There is no scientific consensus yet on the effectiveness of the six mechanisms based on systematic reviews of the empirical evidence.

I’ve recently blogged about the notion that all investing should have some element of “impacting investing” in it if we’re going to really do something to combat climate change. That raises the important issue of “well, how do you measure whether an investment has an impact?”

That’s where the “Investors Guide to Impact” – written by Florian Heeb and Julian Kolbel comes into play. In this note, Florian has this to say about that guide:

Based on our research, we identify six different mechanisms of investor impact, aligned with the Impact Management Project classification. To each mechanism, we assign a level of evidence that indicates how certain we can be that it actually works:

๐€: ๐’๐œ๐ข๐ž๐ง๐ญ๐ข๐Ÿ๐ข๐œ ๐œ๐จ๐ง๐ฌ๐ž๐ง๐ฌ๐ฎ๐ฌ
Systematic reviews of the empirical evidence document a scientific consensus on the effectiveness of the mechanism.
๐: ๐„๐ฆ๐ฉ๐ข๐ซ๐ข๐œ๐š๐ฅ ๐ž๐ฏ๐ข๐๐ž๐ง๐œ๐ž
Empirical studies show that the mechanism has been effective in specific settings. Yet, it remains unclear how far these findings can be generalized.
๐‚: ๐Œ๐จ๐๐ž๐ฅ-๐›๐š๐ฌ๐ž๐ ๐ฉ๐ซ๐ž๐๐ข๐œ๐ญ๐ข๐จ๐ง
Economic models predict that the mechanism should be effective under certain assumptions.
๐ƒ: ๐๐š๐ซ๐ซ๐š๐ญ๐ข๐ฏ๐ž
There are narratives that rationalize why the mechanism could be effective.

What stands out: Currently, ๐˜ธ๐˜ฆ ๐˜ฅ๐˜ฐ ๐˜ฏ๐˜ฐ๐˜ต ๐˜จ๐˜ฆ๐˜ต ๐˜ข ๐˜“๐˜ฆ๐˜ท๐˜ฆ๐˜ญ ๐˜ˆ ๐˜ง๐˜ฐ๐˜ณ ๐˜ข๐˜ฏ๐˜บ ๐˜ฐ๐˜ง ๐˜ต๐˜ฉ๐˜ฆ ๐˜ฎ๐˜ฆ๐˜ค๐˜ฉ๐˜ข๐˜ฏ๐˜ช๐˜ด๐˜ฎ๐˜ด. So still much work ahead.

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