The most important part of an impact investment is actually seeing the impact. For the investment to be meaningful in financial terms, the money needs to be followed up and paid back. And as much as the investor tracks the financial side, there must be an equal monitoring of impact over the term of the investment, with success only coming when there is tangible generation of positive social and environmental change.
The purpose of monitoring and evaluating impact is to determine if the investment is having the intended effect, and if it is thus proving to be an impact-effective use of investment capital. The process supports a factual appraisal of past and current performance, and makes this information available for future decisions.
Monitoring and evaluation takes place over the course of an investment, potentially quarterly or biannually, and is most commonly performed in tandem with oversight of the financial side. In some cases (especially when the investment term is short), it may be necessary to continue monitoring the organisation and its beneficiaries beyond the investment term to establish: if a real impact is indeed being generated; if it is sustainable; and if the organisation is continuing to work in alignment with the mission and purpose of the original investment.
The key points when following up an impact investment are: