We’re going deeper in my exploration of the current state of impact measurement and management, with Sarah Gelfand. She’s Managing Director of BlueMark, an impact verification business that was spun-out of consulting firm Tideline.

She works with the world’s leading impact investors, to verify their impact results across both their management practices and their impact performance. And most recently she authored a report called ‘Raising the Bar’, which attempts to improve the quality of impact reports, which is vital, as there’s more being published than ever. 

The Impact Stack

This podcast was one of the initial conversations that inspired the long-form research paper, The Impact Stack. The insights and ideas discussed made me realise that impact measurement frameworks had consolidated, they’d reached an inflection point.

The report captures the core set of systems that leading impact investors are using today.

Read the repot here.

Listen on Soundcloud

On this episode…

Sarah offers lots of great insights, helping us understand how various impact frameworks fit together, the importance of being guided by a central strategy, as well as her hopes for the emergence of more reliable impact data to help us move beyond rhetoric and to drive better impact performance. 

This was the second episode in my series of discussions exploring the current state of Impact Measurement and Management, and how the harmonisation of leading frameworks represents a powerful inflection point. 

My key takeaway this week…

“I certainly believe that a lot of the capital that’s been deployed under the label of impact investing has done wonderful things. But I’m disappointed that we can’t put more data behind that. And that we can’t be honest with ourselves about where and when it works, and when it hasn’t been as effective as we’d hoped…

…But that’s going to require greater transparency and reporting, and needs foundations of good impact management to feed into the reporting. Otherwise, we will just be victims of good rhetoric.”

Good Future’s Good Books

Measuring Social Change

By Alnoor Ebrahim 

I wanted to recommend a book by Alnoor Ebrahim called Measuring Social Change and, Alnoor is a professor at Tufts University in Boston and he has thought a lot about how non-profits measure change. But he’s also thought about how to extend that to for-profits and impact investing. But I think it’s that intersection that he writes about, and the frameworks that he introduces, that are quite thought provoking, and a good read. I do read books outside of the impact investing role, but I’ll leave it at that one for now.

To Paradise

By Hanya Yanagihara

Please note, all book recommendations are directed to Booktopia, a local, Australian online bookseller, and if you choose to buy through that link you also support the podcast as we may receive an affiliate reward. Thanks in advance!




‘Raising the Bar’ report

IMP – five dimensions

IFC Impact Principles 


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Full Transcript

Note: this was an automated production by Otter.ai, so some errors may remain

John Treadgold  

Sarah Gelfand, great to have you on the show. Thank you for giving us some time today.

Sarah Gelfand  

Thank you for having me.

John Treadgold  

I’ve talked a lot about the evolution of impact investing on this show, but few guests have quite as much experience as yourself in working with the development of the standards and frameworks that really underlie impact investing. You were working at the GIIN in the early days when the IRIS metrics were being developed. So maybe you can start by helping us understand what the perceptions were back then of impact investing whether it’s evolved the way you anticipated?

Sarah Gelfand 

Yeah, thanks. It’s a great question. I do think at the beginning, as the industry was coming together at the GIIN, there was a lot more focus on proving that these kinds of investments could generate financial returns. And the impact was taken as a foregone conclusion. Because the people that were pursuing impact investing were really committed to making change. There were always conversations about metrics and a belief that we needed to organise some of the same kind of pillars of infrastructure that the financial system,s have standards, ratings, etc. 

But some scepticism about the feasibility and the usefulness and how to do it in a way that wouldn’t be a drag on the efficiency of deployment of capital. And I guess, I think things have changed pretty dramatically in the past 13 plus years. I don’t know any impact investor now who can go raise a fund without having a really thoughtful and detailed plan for how they’re going to measure and manage to optimise for impact.

John Treadgold  

And to take impact investment to the next level? Do we need to think in the same models of finance? I mean, we have new sustainability metrics coming through with the ISSB. Do you think that’s important? I mean, it’s naturally a more qualitative assessment process rather than quantitative. How do you feel that that constant comparison with, as you said, credit ratings and that sort of thing?

Sarah Gelfand  

That’s a great question. I certainly think there are elements of infrastructure that exist in the financial markets that if applied to impact investing would make for greater accountability, transparency and efficiency in the deployment of capital. But I think it would be a mistake to take the playbook straight out of the financial world and layer it on to this arena where we operate where we’re trying to drive change that’s inherently multi dimensional. And so I absolutely think developing stronger muscles as an industry about use of qualitative information. And an ability to analyse and synthesise context is paramount.

John Treadgold  

And as this space has evolved, we’ve developed this alphabet soup of different frameworks. And that can get people distracted in managing their impact measurement processes. And that’s something I really want to talk through today is the stages and where we’re at now. 

But one big indicator of progress is the emergence of BlueMark, which is the organisation where you work spun out of Tideline. And I think its existence is an important milestone, if I’m laser focused on on impact verification services, specifically for impact investors, so maybe start with what drove the creation of this very specific offering.

Sarah Gelfand  

Thanks. I do think BlueMark’s existence is the real sign of a maturing industry. And we were born in large part because an increasing number of voluntary standards, standard for which actors that signed up had to bring a disclosure statement forward that showed how they were aligning with the standards, that self reported information was no longer going to cut the mustard. And so having an independent or a third party, come look under the hood and attest to the fact that what was in that disclosure was accurate and of a high quality was what the market was migrating towards. And so, in fact, verification is still new, verification of disclosures are in the form of commentary on a practice, domain or results domain, is still something that the market is embracing, but in it’s still coming along, but I’m excited about the future, or I think if we want people to take impact information seriously, we need to be willing to invest in having the third party legitimacy, rooted in having done an independent assessment be part and parcel with presenting the information.

John Treadgold 

That’s right, that third party verification is a real achievement. But then that work assumes a baseline of impact measurement and management processes, from an investment firm. And if we recognise impact measurement as a starting point. The way I see it, an investor will I mean, they need to build strategy. They need a theory of change. But they’ll essentially identify metrics measure a baseline, monitor change. But I think, with this focus on measurement, we’re realising that that’s not enough on its own, we need this management layer. So what does that look like? For an investment firm? How do you see the importance of layering management on top of impact measurement?

Sarah Gelfand  

Yeah, I love that question. I again, I think back in the early days, there was a lot of focus on what to measure, are you measuring using standardised indicators? Are you tracking those over time? And at times it felt like the conversation was divorced from, What are you going to do with that data? How do you know that’s the right data? And how are you going to engage with that information to support your investees or make better future investment decisions. 

And so your stakeholders have come together in a number of forums in our industry, the Impact Management Project was a stakeholder driven effort, the operating principles for impact management were another one and the SDG Impact Standards as well. And many of these standards have helped migrate the conversation from what to measure, to why to measure and and how to manage. And I guess for me, that means that the considerations related to impact get embedded in the way a firm operates from the very earliest considerations and screening of potential investments, all the way through till exit. And furthermore, that the governance of a firm, the transparency around its reporting, all of that has an inclusiveness of impact information and, and goals.

John Treadgold  

And I think you have a unique position. In assessing this stuff. You obviously understand the technical requirements in the background, but then day to day, you’re overseeing a whole lot of different processes that all different investors apply. And so I’d love to try and map out for people and make this quite practical. In terms of where we’re at now. I feel like we’re at an inflection point where we’ve got this valuable harmonisation of frameworks and measurement tools. And obviously it’s not just as simple as aligning on a standardised set of metrics. That’s one layer of it. 

Can you talk us through what you see is some of the key frameworks that that groups are using. Also, measurement tools and perhaps defining the different layers and how they work together? Obviously, we’ve talked about IRIS plus metrics as a system. IMP, the Impact Management Project is an important layer for building that theory of change, IFC impact principles as well, maybe you can help us work through a bit of a chronology if possible. I know it’s difficult, but yeah, I think that that’s something that people would really value.

Sarah Gelfand  

Well, sure. And I will say it’s a real privilege to get to look under the hood of so many different management firms and the way they’ve thought to stitch together these frameworks and or just put a structure around something as hard as managing to social change in a portfolio. But I do think it all starts with a strategy. Most impact investors that we look at, and when we engage with them, have a thoughtful strategy, they have gotten far enough along and raised capital on the basis of saying, this is the change I hope to see with these investments, this is why you should believe that the strategy will work and and so these are the problems I’m going after. 

Investors also tend to be pretty good at developing due diligence frameworks that allow them to evaluate potential investments based on their fit or alignment with that strategy. I think In that is a place where things like the IMP ‘five dimensions’ come in as you consider the fit of a company with what you’re trying to achieve. Are you, in a wholesome way, looking at the different ways their work, ladders back up to where you’re trying to do and thinking about your value add and your contribution as an investor, that’s a dimension in the Impact Management Project. The risk or potential negative consequences associated with the investment and, and other things like the who and how much. 

And then we see a lot of investors kind of get to a point where their investees, during diligence, and as they’re planning to move forward with an investment agreeing about KPIs they might track over time. Where I think things are still a work in progress for companies and investors together is, you’re tracking that data using standardised metrics in a way that makes sense for the business and the investor and its portfolio. 

Honestly, setting targets is challenging for many of our clients we work with. And then obviously there for the whole field still has a lot to do to think about responsible exit policies and frameworks there. 

But back to your question about layering on a specific tools and principles. I do think the Operating Principles for Impact Management and the SDG Impact Standards are both good,  cross cutting, sets of concepts or ideas for how to embed impact across the lifecycle. The types of questions you ask and the specific metrics you track can be informed by things like the Impact Management Project and IRIS, but this layer cake is complex, and often refining it based on your strategy is a journey.

John Treadgold

And let’s focus in now on the SDG Impact Principles, and IFC Impact Principles. Would they work together? Or are they an either or, question?

Sarah Gelfand  

It’s a good question. They have developed a map of how they layer and connect, there are a lot of connective points, the SDG Impact Standards do talk about a few things that the Operating Principles don’t fully address, like reporting and transparency, among others. But there are a lot of points of connectivity. And they both are frameworks that really help connect a strategy with its governance and management so that impact, and accountability to impact, is attainable.

John Treadgold  

And the metrics, Iris plus metrics from the team, very central, I have had some feedback from people that say it’s quite overwhelming because there’s, there’s just simply so many and that’s, of course, important. The challenge of categorization in any format, right that we want enough detail that we can be specific. But if we have too much detail, then it’s irrelevant because there’s no comparability because when we’ve got a category for everything, how do you see that working right now? Is there an appropriate level?

Sarah Gelfand  

Gosh, I think you just articulated a challenge that so many of our clients face, there is a desire and a hope to use standardised metrics as much as possible. But often a practicality, that the KPI a business wants to track, that is a good proxy for the impact, is not in the library of Iris metrics. So I think that again, starting from your strategy and what data you need to know to ensure you’re on track with that strategy is most important. If there is a standardised metric in the iris catalogue that can work for everybody involved with I think using standardised metrics is the first and best path. But if not, I think we have to recognise that standardisation is impossible in all cases, and you need really good decision useful KPIs, and you can’t, you shouldn’t not measure something that’s important just because there isn’t a standardised indicator in the library that looks like that.

John Treadgold  

That’s right. It’s not the be all and end all. And it’s good to know that isn’t sort of required for it to be high integrity. And I think that then leads on to impact performance. Right, and being able to make comparisons between peers, I guess at a higher level, but then within one’s portfolio as well. And that might not be possible if you’re investing in renewable energy, but also in childhood education, very difficult to compare that impact. But the work goes on to try and build a really solid system of impact performance. COMPASS is something that the GINN has developed. I spoke to Dean Hand, head of research over there about that development. How do you see that integrating? It’s still very early days. But what’s the feedback?

Sarah Gelfand 

Well, I’d like to come back and answer that after coming up with something else, you know, mine, which is to say that, you know, we’ve been talking a lot about the tools and systems and managers should have internally for their own internal processes. 

We haven’t talked as much about the transparency and the reporting out to stakeholders that is necessary for somebody outside of a firm to really know whether a manager is attaining its desired results. And despite the proliferation of standards that help us know what to measure, and what good practices, we’ve really not, as an industry, had standards, about what should be disclosed in a performance report. 

So what are the key elements of a good impact report, what needs to be in a report for an investor to have confidence that they have a complete view of the progress and the likelihood of results being realised? And we saw that gap at blue mark about a year ago and embarked on a process of stakeholder consultation to ask the market? What do you think belongs in a report? How could we make impact reports better? And what are we getting wrong today? And excitingly, the market really did sort of lift up and if you looked at their pieces of feedback, and align on some key elements that all reports should have. 

And I’ll link that to COMPASS now, which is to say one of the things that the market wants to see more of in impact reports is performance and data contextualised and presented in a relative way. So performance, relative to a baseline, relative to a target, relative to year over year performance. And the COMPASS method provides a lot of insight into how to do that, across different types of investments across the portfolio, and I think is a really useful, emerging tool for the industry as we start to put more consistency in the way we’re reporting. But I do think it’s very important that we agree as well on the key types of information that should get disclosed in a report, as well as the best practices for comparing.

John Treadgold  

Well, that’s right, that was the Raising the Bar report that you released. And we all have read many impact reports, often really glossy images of wind turbines and smiling children in school. But when it comes to that substance, there’s often little consistency. And I think that goes back to our first point about trying to match the consistency of financial reporting, which is by its nature, it has to be consistent, but the qualitative nature of this makes it a different beast. And so, is there hope that there will be a model for how an impact report should look to try and improve that comparability and boosts the integrity of it?

Sarah Gelfand 

Well certainly I think this is the next frontier for our field. I think the research we did really lifted well really made abundantly clear that there is an enormous amount of dissatisfaction and frustration with the state of reporting today. Managers spend a lot of time preparing these glossy reports, but question whether they’re and how they’re used by LPs, or their investors. And their investors don’t necessarily trust the vanity metrics that are showing up in the report. So we’re spending a lot of time producing things that may have limited value with not providing the credibility that much of the market wants to be able to use this information to make decisions. 

And so a key part of what we need to overcome this negative equilibrium is one of our interviewees said is a clear point of view about good what good reporting is. I hope that are raising the bar research put a stake in the ground about what early market consensus suggests, but there is definitely more work to be done to get market alignment and then to get adoption and uptake. And I do believe in, from where I sit at BlueMark, I know it’s convenient to say this but I think verification can be an accelerant of driving higher quality reporting because it will help uncover earlier in the process where the gaps and deficiencies are in the reporting today and give folks a roadmap to improve. And help investors know where they should engage to strengthen reporting, and what to ask to get better data.

John Treadgold  

It’s an interesting one where it comes back to motivation. And if an investment manager has an impact label product, they’re producing an impact report. And the question is why? You know, they want to have a positive impact on their beneficiaries. But essentially, it’s because their LPs are expecting it, LPs being their Limited Partners, which are the investors into the manager who then invests down the line. And so that’s what you talked about there, the LP’s expectations. And and I think the experience that I find is that it’s, and I think this is unique to impact, where it’s the investment managers that are leading on the all of the one key elements we talked about today, the framework, it’s not the LP saying. What do you guys think of Compass, you know, they haven’t looked into it more that it goes from the manager, leading and using it and explaining to the LPs, why this is a valuable process? Were there any specifics that the LPS that came through it because I believe you surveyed LPs, as much as the managers to understand what they want. Is there a bit more detail about how they explained they’d like to see this information presented or the motivations for them to even be involved?

Sarah Gelfand  

So great question. And of course, not all LPs are the same. And they come to this work with different levels of sophistication and resourcing and different needs. I think, just to go back to a comment from previously, I think the average LP is getting better at interrogating practices, and so knows that it’s important to understand an investor’s strategy and management approach. They haven’t figured out what to ask for when it comes to reports. And what’s appropriate or feasible to ask for. I think they uniformly want to feel like the information they’re getting is complete, that they’re not getting cherry picked stories and vanity metrics. But those are not necessarily tangibly connected to some specific guidance and standard. And so what LPs, I think crave is a standard or a sort of set of guiding principles that they can then sign up for and say, This is what I expect. And this is what good reporting can and should be, and you should report in this way. I also want to say because LPs are different, I mean, the translation of impact remains a big part of the challenge, right? If I’m managing a diverse portfolio on behalf of some more retail clients, and I want to be able to roll up impact results and communicate them to a more lay audience, I want different things from an impact report than if I’m a, you know, a sophisticated foundation that wants to make sure that my impact investments are connecting and having the same sort of contribution towards my grant making strategy, as I’d hoped. And so we have to recognise as a market that we have these different users in mind when we prepare reports, and there’s much to be done to figure out how to triangulate all that.

John Treadgold  

Definitely, definitely. And I appreciate this conversation, we worked through a lot of those frameworks and coming to this point of trying to have a more detailed impact performance process. But I think something that we haven’t really talked about and that would, I guess, over line, all of it and be something that would weave through everything we’ve talked about. And that’s of course, the SDGs. 

So 2015, this was created as a model of the UN’s 15 year plan. I don’t think they had planned for it to be factors that impact investors can use to measure the effectiveness of their investments, but it has become a really useful system. Where do you see the SDGs fitting in here? Is it almost a hygiene factor that an impact investor really needs to start mapping to the targets?

Sarah Gelfand  

I mean, certainly a lot of the standards encourage alignment with the SDGs because they do provide a common organising framework for all sorts of different actors. And they also are a way to anchor the importance or the legitimacy of the problem that an investment strategy is trying to achieve. But, you know, we see folks who find the SDGs to be too meta, to distant from the work on the ground they’re trying to do, to really have meaning. Some find that alignment more helpful and productive and sharpening their strategy and clarifying to an external audience what it is they’re trying to do than others. On the whole I think uptaken alignment around the SDGs as an organising set of challenges we’re all working towards has been positive.

John Treadgold 

The millennium development goals were from 2000 to 2015. And that was a model and it’s an evolution. But I think that’s right, the UN’s global role is a very difficult one. And I think the SDGs were broad focus, which means respect to this categorization problem. 

How do you think we can, if we’re talking here about impact measurement, and looking at performance, when we get to 2030? Have you thought through how we might be able to assess if we’ve achieved these things? I mean, I can’t imagine we’re going to be ticking down. And on midnight, we’re going to say yes, zero poverty, we made it. You know, that’s a bit glib. But yeah, how do you see that measurement challenge from a global or global international development perspective?

Sarah Gelfand 

Well, I might just try to answer from the perspective of the impact investing field, which is to say, part of why I think upping the game on reporting is so critical is because we talk a good game as an industry about all the work we’re doing to solve social environmental problems. But as of now, we still have very little data to stand on to show what contributions investing in this way have made. And I certainly believe that a lot of the capital that’s been deployed under the label of impact investing has done wonderful things. But I’m disappointed that we can’t put more data behind that. And that we can’t be honest with ourselves about where and when it works, and when it hasn’t been as effective as we’d hoped. And so more transparency about what works, how well things are working and when they’re not working, is so fundamental for us to not fall victim to being an overhyped strategy and to recognise our rightful place alongside government, philanthropy and all the tools we have societally to drive change. 

But that’s going to require this transparency and reporting. And needs foundations of good impact management to feed into the reporting. Otherwise, we will just, I think, be victims of good rhetoric.

John Treadgold 

Okay, moving from moving from the global from the meta down to the micro of your own journey, and how you got into impact. When we’re talking earlier, you mentioned that it was a car accident early on in life, and it led you to some profound personal reflection, can you tell us about that shift? And what it meant to you?

Sarah Gelfand  

Of course, then I do, I think I always, I think like many kids wanted to do something that would make a difference. I was in a car accident when I was 16. And I think like many people who’ve had the privilege of having wonderful doctors and nurses embrace that grateful patient. I thought I wanted to follow in the footsteps of those who cared for me and become a doctor or a medical professional. 

And I don’t think I’m scientifically inclined enough to go that route and found myself in different scenarios, including, you know, working in international development in the field in Tanzania. And really, again, I think, like many who have experiences that are very proximal to inequity, realise that I wanted to do something bigger than what I might have otherwise done. 

And I also worked in a number of nonprofits where I realised that the sort of resource constrained mindset of a nonprofit and the limitations of philanthropy wasn’t quite going to do it. And then I worked in a handful of for-profit environments where I didn’t know the term patient capital at the time, but I felt like the lack of patience, the lack of appreciation for longer term sustainability impact was was holding us back from doing right by employees by our customers and by all the stakeholders we sought to serve. 

When I had the opportunity to get into the impact investing role in 2009 I found it to be the perfect confluence of a bunch of things that mattered to me. And I feel very privileged to have been there then and been able to ride the journey ever since. And I, I do believe that the work of impact management is profoundly exciting, there’s no playbook, we are trying to bring together different disciplines that are trying to measure really hard and complicated things. And I feel very lucky to have made it my life’s work up to this point and hope to continue to think about these problems with other smart people for the foreseeable future.

John Treadgold  

Yeah, oh, look, I think I think that’s quite profound. Thank you for sharing that. And I think I echo all of those sentiments. Having found my way into this space, from the international development side as well, I think that’s interesting in the frustration with foundations and not for profits of quite being able to have the impact you want to and realising hang on finance has power, let’s use that as the lever for change. 

And as you said, that this space is nascent, it’s evolving all the time. And that’s pretty exciting. So I think that’s why I wanted to have this conversation today to be really practical to help people engage with it. And understand that sort of intrapreneur that if you’re sitting there in your fund management firm and want to measure more than the standard financial metrics, that there are more that you can measure and that LPs are really interested in that. 

But look, let’s leave that there. Really appreciate this. It’s been really powerful. But first, before I let you go and get a book recommendation. Is there anything that can help people take this further about the world of impact investing?

Sarah Gelfand  

Yes, well, and back to the conversation you’re just having about all the ways that change happens and all the parts of the sort of social sector that think about these things. I wanted to recommend a book by Alnoor Ebrahim called Measuring Social Change and, Alnoor is a professor at Tufts University in Boston and he has thought a lot about how non-profits measure change. But he’s also thought about how to extend that to for-profits and impact investing. But I think it’s that intersection that he writes about, and the frameworks that he introduces, that are quite thought provoking, and a good read. I do read books outside of the impact investing role, but I’ll leave it at that one for now.

John Treadgold 

Oh, come on. It’s summer over there in the US. Do you have any summer reads that really grabbed you?

Sarah Gelfand  

Well, I just read a book called To Paradise, which I really recommend. You’re gonna I’m gonna have to give you the author’s name after this. embarrassed that I can’t.

John Treadgold 

That’s alright. We can put it in the show notes. I think I have To Paradise on my bookshelf. But I can see the cover. We’ll put that in the show notes. So thank you.

Sarah Gelfand  

Thank you very much.

John Treadgold 

This has been great, Sarah. You know, there’s so much to talk to, but I really wanted to keep today really practical and really focused. So we’ll have to have you on again in the future and catch up with progress.

Sarah Gelfand  

Okay, my pleasure. And I really am glad you do this. It’s wonderful that you’re bringing all these different voices to the market to learn.

John Treadgold  

That’s it and that’s good stuff. Thank you, Sarah. All the best. Thanks. Bye.