Measuring impact

Impact considerations are embedded in Zamo's overall investment process. For each investment, Zamo ensures an impact thesis that has measurable outcomes. We have developed a unique 4-step approach to both manage and measure impact.

 

Step one is an impact "sniff-test" in the areas of sustainability and inclusion. In the second step, we apply the Global Impact Investors Network (GIIN) IRIS+ metric system to quantify the impact. This system follows the IMPs 5 dimensions of impact. We then find the points where profit and purpose converge in Step 3 and develop bespoke metrics to measure and monitor these points. Finally, Step 4, focuses on managing impact through the application of the IFC's nine operating principles for impact managers.

Step 1

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We start by selecting managers working in impactful areas, with a desire to have a positive impact through financing the provision of quality, relevant and affordable products and services. We address two impact areas:

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Sustainability, e.g., 

  • Energy transition

  • Resource efficiency

  • Agriculture 

  • Food

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Inclusion, e.g.,

  • Financial services

  • Learning 

  • Healthcare

  • Social housing

Step 2

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We work to ensure that our fund managers are creating a meaningful impact by measuring their outcomes using the IRIS + metric system.

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Application of IRIS+ metrics: a common language of impact

Applying IMP 5 dimensions of impact

We use the IRIS+ metric system in our due diligence and then follow up annually for changes.

Unlike financial metrics where business have converged on GAA, there remain multiple different approaches to measuring impact. We have therefore decided to use the most widely adopted system of measuring impact.

This is the system developed by Global Impact Investors Network (GIIN)

We have chosen to use this taxonomy as:

  • Adopted by 7000+ institutions.

  • Used by most of the world’s largest investors.

  • It ensures and evidences impact.

  • As it is widely adopted it allows for a fair amount of comparability.

IRIS+ follows IMP's 5 dimensions and each dimension seeks to answer:

What

  • What outcome occurred in the period?

  • How important is the outcome to the people (or planet) experiencing it?

Who

  • How much of the outcome occurs - across scale, depth and duration?

Contribution

  • What is the enterprise's contribution to the outcome, accounting for what would have happened anyway?

Risk

  • What is the risk to people and planet that impact does not occur as expected?

We are cognisant that many LP's impose many different impact measurement systems on their investees. In order to minimize the burden on our managers, we endeavor to select IRIS+ metrics that our investees either already gather or can relatively easily estimate (with transparency around the process of estimation).

Step 3

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Together with the fund manager, we identify and develop collinearity metrics that capture the places where profit and purpose converge in their business.

We help manage, focus and quantify points of convergence between profit and purpose:

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Step 4

We work to improve the impact performance of our managers by rating them against the IFC’s nine impact principles and then work with the managers over time to improve their ratings.

Define strategic impact objective(s) consistent with the investment strategy.

Establish the Manager's contribution to the achievement of impact.

Monitor the progress of each investment in achieving impact against expectations and respond appropriately.

Conduct exits considering the effect on sustained impact.

Strategic Intent

Origination & Structuring

Portfolio Management

Impact at Exit

1

3

7

6

2

4

8

Manage strategic impact on portfolio basis.

Assess the expected impact of each investment, based on a systematic approach.

5

Review, document and improve decisions and processes based on the achievement of impact and lessons learned.

Assess, address, monitor and manage potential negative impacts of each investment.

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Independent Verification

9

Publicly disclose alignment with the Principles and provide regular independent verification of the alignment.

Source: IFC’s 9 Impact operating principles