Measuring the Impact of Sustainability-related Investments

As global and EU decarbonisation goals drive the transition to a low-carbon, just economy, sustainability-related investments have seen significant growth - especially through private financial markets. However, a substantial investment gap persists in achieving climate and broader sustainability goals.

While there is a plethora of reports providing data on capital flows into sustainability-related investments, and some studies attempting to address the so-called investor impact, measuring the impact of sustainability-related investments on the environment and society remains largely unchartered territory.

This first report of a series, developed in collaboration with Professor Timo Busch (University of Hamburg) and Eric Prüßner (Advanced Impact Research), examines current literature, methodologies, and data sources for measuring real-world impact. It identifies critical gaps in existing approaches and offers high-level policy and research recommendations to advance measurement of the impact of sustainability-related investments on the environment, society and real economy.

Recommendations for policymakers:

• SFDR review: develop a clear categorisation scheme for sustainability-related investments and ensure mandatory impact reporting in the forthcoming SFDR review.
• CSRD and EU Taxonomy: expand data coverage across entities and sectors. Especially in light of the Omnibus process, it is important to maintain a good level of coverage.
• Develop a standard for socially sustainable investments, for example in the SFDR review.

Recommendations for researchers:

• Improve measurement of investor impact, as methodologies are still lacking.
• Use consistent terminology and methodology to make results comparable.
• Use output measures (real-life impacts on environment and society), in addition to financial activity measures, as proxies for social and environmental outcomes, where possible.

Access the full report here.