Impact Investing: how to be sure?

Bedford Row Capital
3 min readJun 11, 2021


Mr. Lovenstein : Butterfly Effect

Impact investing: “…investments made with the intention of generating a positive, measurable social and environmental impact, alongside a financial return.” There is much and growing interest in impact investing. Talking about impact investing is, of course, quite hollow unless one can measure and demonstrate the said impact. Measuring and demonstrating impact can be difficult; companies spend millions on advertising how they hope to make a difference but how can you better understand what a company will do with investors’ money? Is it measurable or can it be monitored? As a simple guide, there are three key stages to measuring and demonstrating the impact of your investments.

1 — What change/impact?

It is absolutely necessary that a company is clear and specific as to what precisely the intention is when a company looks for investments. What impact, exactly, will be made? The change or impact should be described in terms of specific outcomes. If it is not articulated clearly then how can the company demonstrate its green, social, ethical, or sustainable credentials?

2 — Thesis for change

What is the thesis for the change? In other words, there should be a clear idea of how an investment will bring about the desired impact/outcome(s). Hit and hope is not good enough. There must be a demonstrable link between investment, activity, and pre-defined outcome(s). Noting, of course, that cause and effect are in a complex relationship with one another and that achieving change may take time. Clarity in assumptions and specificity of outcomes defines the best impact investing propositions.

3 — Evaluate the impact

It is, of course, absolutely essential to evaluate, measure and demonstrate the impact of investments with specific data points and tangible results. Unless such results can be demonstrated, how does an investor know whether the intentions and objectives have been achieved? This evaluation should be consistent with objectives, ESG/SDG considerations (i.e. don’t ignore the uncomfortable) and, ideally, have a degree of independence. There are many companies which perform “second party opinion” and monitor performance just like rating agencies monitor credit risks (like Sustainalytics, Vigeo, CICERO and GRI). In many ways, this is no difference than selecting fund managers. Reporting, measuring and monitoring style drift are important for advisers. Change is rarely linear, it is often complex and sometimes contradictory but advisers should understand and be able to evaluate clear communications from “greenwashing”.

Where to turn?

In the investment spectrum, green bonds have received the most attention and should deliver the best clarity for impact monitoring. The key to understanding bonds and their affinity with outcomes and impact is found in their basic structure of operation. A standard corporate bond (even for a company which purports to be a green business) is fundamentally for “general corporate purposes”. This phrase you will see in bond documentation and may be highlighted in the “Use of Proceeds” section (or similar). Green bonds (unlike corporate bonds) have specific outcomes stated in their documentation and are therefore much more reliable (or accountable) when it comes to determining credible options for impact investing.

This leads to an interesting problem with the growing number of impact, sustainable, esg or green funds. If they are predominantly equity funds then they are just as likely to be greenwashing their own strategies (as the invested companies have no direct accountability). Funds which invest in green bonds are much harder to find but are worth the effort. The specific outcome requirements of a certified green bond mean that the managers will be able to look deeper in to impact and outcomes knowing the use of the funds in advance. The role of an adviser has never been more important than to avoid hollow statements and allowing clients to sleep well at night knowing their funds are hard at work at changing the world.

For further information contact:
Anella Veebel —

This article was first published in the FEIFA Members’ Magazine, June 2021



Bedford Row Capital

Structuring and Issuance of Eurobonds. Liquidity and Asset backed. AIFMD exempt solutions for distribution of yield products. Arranger and Lead Manager.