Over the past two years, South Africa and the rest of the continent have been ablaze with the concept of impact investing. This was after the fire was ignited in the southern-most tip of the continent, with South Africa joining the global movement when it was inaugurated in New Delhi, India in October 2018.

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During our acceptance speech, South Africa fully embraced impact investing and proposed it as the Marshall Plan for Africa. This was after observing wide ranging policy failure and leadership gaps across the continent. Impact investing was seen as a solution to these gaps, living up to the expectations of the SDGs (sustainable development goals).

Fast forward to March 2020, South Africa was plunged into a deep and dark pool, in the form of the lockdown, owing to the unprecedented COVID-19 pandemic. Policy and leadership were further challenged and impact investing, yet again, was elevated to the top of the policy-choice pile. This has since been the agenda-setting movement, as a solution out of the crisis that the world finds itself in. However, for this intervention to be supported and successful, it should be believed by those it is meant to assist. Impact needs to be seen and felt. Therein lies the importance of measuring and managing impact – thus the historic publication and launch of the IMM Report1. 

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Definition
It is instructive at this stage to clarify what it is that we would be measuring and managing, for practicality. In this regard, it is important to have a common understanding of what impact investing means. While there are many versions of what it means, the one definition that has been established for our purposes in South Africa and the continent is not too dissimilar from its meaning globally. This working definition is that impact investment is a new emphasis on investment philosophies. It is about investing for a measurable financial and social or environmental return. Investment that can help to tackle these imbalances (financial, social and environmental) in a way that adds up for everyone, delivering sustainable funding for service providers; financial returns and impact for investors and entrepreneurs; and breakthrough ideas that lead to lasting improvement for the world. 

In short, it is about investments that have a positive human impact.

That is why we need to show those whom we aim to assist that impact is real; that it is about people, not just money. The IMM report is going to provide an integral contribution to the integrity of the impact movement. But this needs to be well understood and have meaning to practitioners, owners of capital and those who manage this capital. It is important that they apply the principle correctly, transparently and consistently. 

Applied right, impact investments have the potential to make a significant contribution to important outcomes and improve human conditions. In this regard, proposed is a framework that is premised on five pillars, namely:

• Strategy, 

• Origination and structuring,  

• Portfolio management, 

• Exit, and 

• Independent verification. 

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The last pillar is, for me, the ultimate test. Are we doing this for good or for narrow and short-term interests? Impact measurement and management takes over from this point and ensures the integrity, as well as robustness, of the impact investing process. It further keeps us in check with our domestic and global obligations (NDP, SDGs etc). It ensures improvement of our capitals (financial, natural, human, manufactured, social, relationship and intellectual). Finally, it gives confidence to all citizens that impact is working for them and not just a leadership elite, as we have been observing over the years. 

This is critical because, if people do not see the result, they will stop believing and may revolt against what they see as failed promises. People will only see impact if the results are both visible on the ground and systematically documented. As Sir Ronald Cohen once said, “If impact is a rocket to take us to our end-goal [the end-goal here being the eradication of inequality], then measurement is the navigation system”. This simply means that without measurement, we are unlikely to realise our dreams. 

I would like to extend this analogy even further by sharing a set of identities that a mentor of mine, Themba Gamedze, used to summarise a presentation I gave to the GEPF Board in January of 2020. He smartly summarised it by saying: “So, what you are telling us is that ESG is equal to ‘do no harm’. Whereas impact investing equals ‘to do good’”. I could never have hoped to put it any better. This uniquely adds to the existing body of economic thinking.