Impact reporting
Best practice in impact reporting is moving quickly, partially down to incoming regulation in this area. A few general principles to adhere to include:
A regular cadence of information around impact; at a minimum annually
Offering comprehensive coverage on the major sources of positive and negative impacts
Providing data in a meaningful form (ie with relative benchmarks)
Transparency around impact measurement methods
Bluemark recently conducted a review of impact reporting in general (ie not specific to venture), with some interesting insights including:
74% of reports included investment-level metrics that addressed two or more of the IMP’s five impact dimensions, but only 10% reported on all five dimensions for all investments in their report
Fewer than half of the reports (38%) presented expected targets alongside actual results at the investment level
Fewer than half of the reports used standardised indicators (44%) or cited the sources/ definitions for the metrics included, limiting the comparability of the reported data
The audience of an impact report largely determines what's likely to feature in a report. For public-facing reports, it's unlikely that investors would include as much information on impact performance and risks. While this is understandable to some degree (although we hope that we can get to a place where we can have this discourse in public), reports to LPs should include detailed information on performance and risks in the spirit of having constructive conversations with LPs.
While the current norm is that impact information is communicated in standalone reports, we are seeing an increasing preference for integrated annual reports, whereby the fund's performance is discussed in its entirety.
Snowball has written a piece on how to read an impact report.
Some funds also engage in regular comms on impact-related topics. For example, Planet A publishes a lot on its impact approach, the science backing its investments, and progress to date.
Some examples of VC impact reports:
If you have come across exceptional examples of reports or regular impact communication, please do share them with us.
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