Much guidance exists on creating impact reports, and investors will want to draw on this, as well as referring to their own particular needs. The high level principles of impact reporting apply. Points of special potential relevance to investors include:
For funds or investors with portfolios, it is important reporting sets out clearly the make-up of the portfolio, and its distribution among different activities and areas of focus. These relate to the investor’s method for portfolio classification.
Equally important is the role of the investment in the capital make-up of investee organisations. This relates back to the question of investor impact — i.e. the effect the investor is having upon the organisation and its ability to generate impact. In their reporting, investors must be clear in setting out the role, scale, and significance of their investments to investee organisations. In a similar way, there must be clarity regarding the use and attribution of results, or “claiming” of impact. When on-reporting the impact results of investees, investors must be clear in their own reports as to how these results are being treated, and how and to what extent they relate back to the investment itself.
In detailing specific investments (e.g. in case studies), the relationship between the investment, the aims of the investment, the organisation and the organisation’s aims, and the plans, activities and results, must all be made clear.
The report is useful only in so far as the report itself, and its contents, are readily accessible. Typically this suggests making the report easy to find and download from the investor’s website, and presenting it in a way that will be widely comprehensible. If long, the report must include representative summaries, such that the important information is not buried in hard-to-read appendices. Investors whose stakeholders include people with special needs may need to make their reports accessible in an appropriate range of formats.
Transparency covers the balanced and honest use of information, and the point of reporting negative as well as positive results. Given the non-quantitative nature of many of the aspects of social impact, it is especially important when dealing with numbers to be transparent about how they are being used, and on what basis calculations are being made.
Where results are being aggregated, it is essential to include a transparent account of what is being aggregated, and to ensure that only meaningfully like-for-like numbers are being added. Where aggregation is not feasible or meaningful (as is most often the case), a true description of separate quantities is more useful than a fisted sum. Aggregation must also guard against double-counting of beneficiaries, outcomes and impact. This may be of particular relevance to funds with multiple investments in similar areas, or with investments in multiple intermediaries that have co-invested in the same organisations.
Reports of impact funds are naturally distributed to their investors, but accountability to investee organisations is equally important. Investor reports can help organisations understand the approach and needs of their investors better, and to feel there is transparency in both directions. This also acts as a natural check that organisations whose results are used in the report can agree with its contents.
Accountability may extend also to other investors and the sector at large. Communication among investors can play an important role in developing standards and benchmarks, improving evaluation processes for investors, as well as making reporting easier for investees. Where government or public sector bodies are involved, accountability in this direction can play an important role in shaping future policy.
Impact results within an investor report are likely to be based on the results of investee organisations, and so the primary layer of verification rests with the quality of information aspects of monitoring and evaluation. Where there is independent auditing or substantiation of results, this level of verification can pass up to the investor; elsewhere the investor’s processes must provide assurance that the results are valid and representative.
Investor reports may themselves be audited where appropriate, and make efforts to include information from independent sources that supports findings. As with investee reports, it is important to provide sufficient information within the report to leave an audit trail for readers to be able to review the processes involved, and to check any calculations.
Proportionality puts forward the principle that the level and detail of reporting reflects the size and complexity of the organisation. This applies equally to investors and their treatment of investee organisations — in terms of the reporting they expect from investees, but also in the use and representation of investee results in their own reporting. For funds, it is important to ensure the report is dominated neither by a single large organisation with very detailed results, nor by favourite case studies of a few smaller organisations. Instead it is appropriate to give proportionate attention across the portfolio according to the size of organisations in themselves, and to the proportion of the portfolio that the investments in them represent.