What is meant by 'impact measurement' in sustainable investing?

Impact measurement in sustainable investing refers to the process of evaluating the social and environmental effects of investments. This approach goes beyond traditional financial metrics to assess how investments contribute to positive societal outcomes, such as reducing carbon emissions, improving community well-being, or enhancing access to education and healthcare.

This concept is critical in sustainable investing as it helps investors understand the tangible effects of their capital allocation. By measuring impact, investors can ensure that their investments align with their values and sustainability objectives, which are often a central focus of a sustainable investment strategy.

The emphasis on evaluating social and environmental impacts distinguishes sustainable investing from conventional investing, which primarily considers financial returns. This perspective allows investors to engage more deeply with the implications of their portfolio choices, thus fostering a greater accountability for the broader impact of their investments on society and the environment.