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Head of Impact Services @ The Good Economy
September 2023

Very pleased to see this consultation on the ABCs of impact – and looking
forward to the webinars. At The Good Economy – an impact advisory firm – we use the ABCs with a number of investor clients, so offer a few reflections below:

  • We think the ABCs are useful when discussing impact strategies with clients (e.g. helping articulate intentionality and set levels of ambition), as well providing a means to segment portfolios (e.g. in impact reporting for multi-asset funds or a mixed use real estate portfolio)
  • The 2021 update is useful as it focuses on thresholds – which we believe are critical to authentic sustainable investing, and something that impact investors need to get to grips with more. The challenge is in practice the actual thresholds are often still missing and difficult to get data on (especially for social issues), so as noted in the paper, making the A/B/C categorisation remains something of a judgement call. We therefore welcome the call to make the assumptions and evidence-base more explicit. Would it be possible to suggest specific templates or tools to help ensure consistency around these disclosures?
  • In the 2018 definition, the distinction between B and C was based solely on whether or not the target population was underserved in relation to the outcome. In general that was easier to understand and communicate to clients than the 2021 version.
  • We still think it’s problematic to have a category – ‘Benefit Stakeholders’ – that doesn’t have any actual impact (change in outcomes) embedded within it.
  • Agree with the clarification that ‘Avoiding Harm’ needs to be an intentional action towards improvement. In this light, it would be excellent to change/update the widely used ‘Spectrum of Capital’ which we now feel is out of date. As A doesn’t (necessarily) equal responsible investing (if just a negative screen).
  • Theoretically agree the assumption C>B>A is not correct, but in practice people see ‘C’ as ‘best’ – especially, for example, if you’re a GP trying to position themselves as an impact investor; and some influential impact LPs will only consider investing in funds with majority ‘C’ investments. In the UK SDR is also trying to make the point that their three labels of ‘improvers, focus and impact’ (which broadly track the ABCs) are not hierarchical, but we’re sceptical whether the market will see it this way (as they currently do not).
  • Should this paper should tackle the issue of labelling? Reading between the lines, the implication is that funds which target companies who Contribute to Solution are ‘impact investors’. This echoes the alignment between ‘C’ and SDR’s ‘sustainable impact’ label. Should this be made explicit? (and what are the implications of the consultation paper’s suggestion to only use C for a short time before reverting to A?)
  • Agree with the proposal to only classify as “C” if half or more of the enterprises’ business is generating that outcome. As well as revenue and costs, could this be made based on number served/reached? (e.g. for an enterprise using a cross-subsidization model).
  • The 10% change for the depth of impact seems arbitrary. We would expect this to be highly contextual (e.g. see World Bank work on poverty gap calculations – essentially depth thresholds – which vary significantly between countries). Can the update offer guidance on what should be disclosed (i.e. a level of change, rational for why that % and evidence) rather than specify a figure?
Impact & Engagement Director, Arisaig Partners
August 2023

Hi Impact Frontiers community,

Thanks for another thoughtful discussion document.

I work for a listed equities impact fund investing in emerging markets. We have used ABC but, like many others, we have been using the 2017/18 definition. I feel that identifying context-specific societal/ecological thresholds and trying to establish whether an enterprise or its stakeholders is within a sustainable range are complex exercises with high data/expertise requirements that ultimately still lead to subjective answers. I appreciate this is not an area where you are currently proposing changes but might explain the use of the legacy definitions. I would be keen to hear from others if they’ve found pragmatic approaches to the above.

In terms of the proposed changes to proportion of underserved and proportion of revenue, I think these broadly make sense. I also agree that impact classification and valuation are complementary. Classification might be more suited to being used at an early stage of an ‘impact due diligence’ funnel as a filtering/screening tool and impact valuation a deeper level of analysis conducted at a later stage to help choose between eligible investments.


Unity Trust Bank
August 2023

Hi Impact Frontiers team and others,

At Unity Trust Bank, we made a commitment to report against the ABC classification in our upcoming impact report 2023 (to be released in early 2024); we made this commitment publicly in our last report. For context, we are a UK based commercial bank providing banking services and loan financing to social enterprises, coops & housing associations, memberships organisations, SMEs and charities across the UK.

Initial thought to the proposed changes:

  • Proportion of
    underserved stakeholders – agree to threshold of over >50%
  • Proportion of business
    – agree to >50% of either rev or cost measure appropriately and recognise that a justification may need to be put in place if doing unlisted equity or debt into SPV and other structures. 
  • Scale / Duration /
    Depth – I agree with removing scale and that being more an evaluation piece. However, I think removing ‘duration’
    might be difficult given the role an investor (particularly lender rather
    than equity) plays in the lifecycle of project delivery or organisational
    development. On this I’d say:

    • A lot of lending
      might go to organisations who have not experienced M&E systems that
      are structured on ToC and outcomes / impact measurement which have a
      structured baseline/endline measure for 10% improvement. However, we
      might have a specialist youth training programme that takes in NEET young
      people, provides 6 months specific wellbeing and confidence training and
      then after that, there is an above NEET average engagement back into
      education or employment etc. While the delivery provider didn’t do the
      appropriate measures, I’d expect someone in the investment / lending team
      like myself to have enough experience of the sector to know what is a
      good proxy for duration creating a ‘c’ level impact.
    • The point above
      illustrates the challenge with depth. I think the ‘10% minimum change’
      needs to be illustrative of best practice assuming the recipient has good
      M&E in place. If they do not have this in place, then depth
      might rather be based on finding a reasonable and justifiable proxy for
      the rate of outcome being avoided or achieved. For example, we provide
      emergency accommodation / shelter for women fleeing violence. While these
      are emergency measures, they are critical as a stepping stone to a
      positive outcome. Without that service, the probability of an adverse
      outcome is much higher. 

The latter point on ‘duration and depth’ also raise the challenge with trying to distinguish between ‘valuation and classification’. While I agree they are different levels of scrutiny and evaluation technique, I’d say any classification of a ‘C’ by definition will require techniques drawn from M&E practices or at least using proxies and assumptions drawn from previous evaluations.

I should finally note we do want to integrate ‘investor contribution’ in due course but will likely start with the ABC straight classification.

Hope some of the above is interesting for others considering the ABC!

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