Impact investing risks being marred by poor measurement standards, says Aegon Asset Management’s Maradei

Impact investing risks being marred by subpar measurement and reporting, leaving investors disenchanted with asset managers’ overly positive claims, says Brunno Maradei, Global Head of Responsible Investment at Aegon Asset Management.

Impact investing is founded on the notion that investors can pursue financial returns alongside positive and measurable social and environmental effects. While Maradei says it is an exciting field, he fears it is being sullied by the attempts of some asset managers to gain a competitive advantage over rivals.

“My cynical self would argue that the new impact trend is just about obfuscation and an attempt to differentiate in an increasingly crowded ESG investing space,” he says. “While impact investing is respectable if done properly, this field is still struggling with subpar measurement and reporting techniques, leaving many investors wondering if they are truly achieving positive social and environmental impact through their investments.”
In contrast to his experiences at the European Commission’s development department, where he says reaching consensus on a framework for measuring impact was ‘gruelling’, Maradei says there appears to be limited effort in measuring and demonstrating impact among the growing body of impact investors in the private sector.
“As investors get ever savvier about sustainable or green investment and regulators work toward standards and data improvements, it seems some asset managers are looking for frontier terrain, where it is possible to differentiate by claiming positive impact without worrying too much about evidence to back up their claims,” he says. “I have read many ‘impact’ reports that demonstrate no real measurable impact - sometimes they are merely last year’s sustainability report relabelled with the new buzzword.”
Despite these concerns, Maradei does believe there is real, measurable value in impact investing, saying he is encouraged to see the industry now refocus on quantifying and demonstrating its contribution to a more sustainable future.
“The key to impact investing, in our view, is reasonable expectations,” he says. “Impact investing is an exciting field, and investors can indeed have a significant positive impact on the key global sustainability challenges. But don’t expect silver bullets and be wary of overly positive reporting.”
He views impact investing on a continuous scale of “potentiality and certainty”. At one end of the spectrum, he says there are direct private equity and debt investments. 

“These provide close to full confidence on the use of proceeds - impact metrics and reporting can be agreed upfront as part of investment agreements. Impact reports from development finance institutions demonstrate what good impact measurement and reporting should look like.
Further down the spectrum, he says there are green and social bonds which outline clear use of proceeds and reporting requirements. At the other end of the scale sit investments made through public markets using negative or positive screening, where impact is “more marginal, less certain, measurable and attributable - but can nevertheless make a positive contribution over time as they reach scale, and in combination with targeted engagement”.