Despite widespread adoption, ESG frameworks remain fragmented and incentivize input reporting over true outcomes—undermining comparability and enabling "impact washing". Impact Investing 3.0 flips the script by emphasizing outcome-based metrics and leveraging tools like GIIRS, IRIS+, and Impact-Weighted Accounts to guide authentic, data-driven impact strategies.
Limitations of Current ESG Frameworks
Current ESG reporting systems lack a unified standard, resulting in divergent ratings that confuse investors and stakeholders. Most frameworks—including GRI, SASB, and PRI—focus on disclosing policies, management systems, and activities rather than measuring downstream outcomes, leading to box-checking rather than meaningful impact assessment.
The ESG Ratings Divergence Problem
A study by MIT Sloan found that ESG ratings from different providers have an average correlation of just 0.61—compared to 0.99 for credit ratings. This divergence undermines investor confidence and creates confusion about which companies are truly sustainable.
Outcome-Based Metrics for Authentic Impact
Impact Investing 3.0 prioritizes metrics that quantify the actual social or environmental changes achieved—such as percentage of low-income customers served or tonnes of CO₂ averted—rather than proxy outputs. These outcome metrics provide clearer evidence of real-world benefits and guard against greenwashing by tying success to verifiable results.
Output vs. Outcome Metrics: Understanding the Difference
- Number of sustainability policies implemented
- Existence of a diversity program
- Disclosure of carbon footprint
- Presence of board ESG committee
- Tonnes of CO₂ emissions reduced
- % increase in workforce diversity with statistical significance
- Number of low-income customers with improved access
- Quantified health outcomes from product interventions
Leveraging Next-Gen Impact Tools
A new generation of impact measurement tools is enabling investors to move beyond traditional ESG frameworks and capture authentic impact. These tools provide standardized metrics, rigorous methodologies, and frameworks for translating impact into financial terms.
GIIRS
A ratings platform from B Lab that benchmarks funds and companies on social and environmental performance, integrating impact rigor with financial analysis.
Key Features:
- Comprehensive assessment across governance, workers, community, environment, and customers
- Standardized scoring system for comparing impact across diverse investments
- Third-party verification to ensure data integrity
Case Studies: TPG Rise Fund & Bridgespan Group
The Rise Fund's Impact Multiple of Money framework quantifies potential social and environmental gains via a six-step methodology, allowing direct comparison of impact returns across opportunities.
Key Insight:
The Rise Fund requires an Impact Multiple of Money of at least $2.50 for each $1 invested, embedding impact valuation alongside financial underwriting.
Bridgespan's guidance highlights that 97 percent of investors identify measurement challenges as a key barrier, advocating structured frameworks to assess impact risk and performance throughout the investment lifecycle.
Key Insight:
Bridgespan's approach integrates impact due diligence, monitoring, and reporting into each stage of the investment process, from screening to exit.
Building an Impact Measurement Roadmap
To operationalize Impact Investing 3.0, fund managers should follow these key steps:
- Integrate outcome metrics into investment criteria and portfolio dashboards.
- Adopt governance frameworks, such as the Operating Principles for Impact Management, to standardize processes and accountability.
- Train teams on data analytics and impact valuation methodologies to ensure robust internal capabilities.
Ready to Implement Impact Investing 3.0?
Download our Impact Measurement Toolkit to access templates for outcome-based dashboards, GIIRS and IRIS+ integration guides, and step-by-step frameworks for implementing Impact Investing 3.0 in your fund.