What is an impact rating? How can impact ratings inform investment decision-making?
An impact rating is a weighted sum of indicators that collectively cover multiple dimensions of impact.
The process of creating an impact rating challenges investors to formalize the assumptions, intuitions, and value judgments about impact that they may currently be making in a more implicit or intuition-driven way. This enables investors to test their thinking against data about the stakeholders and natural environment experiencing the impact. It also helps teams align on a shared understanding of their impact goals and priorities for each dimension of impact, and integrate those goals and priorities into decision-making.
- Impact ratings organize the information you collect about impact to facilitate comparisons between the impact of different investment opportunities, and to integrate impact alongside financial considerations in investment decision-making
- Building an impact rating can help your organization align on a shared understanding of your impact goals and priorities
- There is no one ‘right’ approach to impact ratings: organizations build different kinds of impact ratings to reflect their particular context and goals
Introduction to Impact Ratings
There is no one ‘right’ way to build an impact rating. Investors build different kinds of impact ratings to suit their investment contexts and impact goals. We will explore two examples in this curriculum: a simple High / Medium Low version, and a more complex quantitative non-monetary version
Case Study – Frontiers Fund
To see how impact ratings can help investors use information about impact to inform decision-making, we’ll look at how the fictitious Frontiers Fund uses a High / Medium / Low impact rating to evaluate prospective investments.
Worksheet - Create an H/M/L Impact Rating
Now do it yourself! Our Impact Rating Worksheet can help you mock up a first draft of an impact rating in less than an hour.