From investors to activists, our constituents have been clamoring for a tool that operationalizes the Transform Finance approach to inform investment decisions. In light of this, we have developed a new methodology and a due diligence and audit tool in order to help investors assess how their investments map onto an impact thesis, what negative impacts exist, and whether impact is being left on the table. 

Most impact measurement tools focus mostly on the products and services of portfolio investments. They do not net out negative impacts, consider structural and systemic impacts of the enterprise or the investment, account fully for additionality, or focus on the opportunity to drive change via active management. This approach leaves on the table great opportunities for impact by focusing on the “what” at the expense of the “how.” In doing so, these tools may rate highly enterprises that address a social issue, while failing to address questions around ownership of, and wealth creation from these new products. These narrow tools neglect all those companies who are operating in non-impact sectors, but where questions of ownership and wealth distribution are just as relevant.

Ultimately if the goal of impact investing is to create an economy that produces more equitable outcomes we cannot leave"how" questions unaddressed.

The Transform Finance Methodology is unique in three critical ways:


The Methodology applies a comprehensive and transformative lens that goes beyond the products and services of portfolio companies (Direct Impact) and is especially relevant to systems-thinking investors. It factors structural elements such as workforce and supply chain (Indirect Impact), as well as the terms and the context of the investment itself (Investment Structure & Delta).

The Methodology centers a social justice orientation that is rooted in the Transformative Finance principles of deep community engagement in design, governance, and ownership; creation of more value for communities than what is extracted by investors; and fair balancing of risk and return between all stakeholders.

The Methodology factors the degree by which the investment itself has made impact both specifically and at the field level, and favors investments that actively aim to move from good to better rather than investing in best-in-class only.

An example breakdown of one of our metrics, community engagement

An example breakdown of one of our metrics, community engagement

How The Methodology Works

The Transform Finance Methodology is a holistic assessment with four categories of impacts, across which approximately 25 metrics are scored qualitatively based on investment features. Each area is assigned a qualitative score between 0 and 3 that is flexible while also being precise enough to give a consistent score; definitions of these criteria are currently being calibrated across a series of trial runs. Users also have the ability to assign a negative score in the event of a countervailing impact. 

The ultimate flexibility of the methodology lies in the ability to weight different metrics accordingly as needed. This is in recognition of the fact that each investor has their own impact thesis, and it is critical to allow each investor to optimize the tool for their own needs in order to give the most clear picture of potential impact achieved (or missed). 

Our metrics are distributed across four broader meta-categories:


Direct Impact: Complementing existing tools, the Methodology focuses on the transformative aspect of the product or service: whether it addresses a significant problem for marginalized and underserved groups, and what negative direct impacts arise from the product or service and its creation. This category can easily be used in tandem with existing impact metrics, adding an extra dimension rooted in social justice and equity. 

Indirect Impact: Indirect Impact captures the practices, processes, and places affected by an investment in ways irrespective of the product or service itself. Indirect Impact measures include Employment Practices, such as factors of job quality; Wealth Creation Practices on who benefits from enterprise success; Community Practices, such as community design and governance, Environmental Stewardship; and Scale and Replication Practices, to address how much impact can be achieved – directly or via replication, comparatively per amount devoted to an investment. 

Investment Structure: The Methodology evaluates how the investment itself, by its structure or ancillary factors, drives impact. This includes the alignment of investment terms along risk/return/impact balance, the additionality of the investment and its crowding-in potential, the potential to signal viability to other investors, and the advancement of best investor practices for others to replicate. This category is a fundamental departure from other measurement systems by ensuring that investors willing to take risks and further the field are scored highly. 

Investor Delta: Investor Delta indicates the magnitude of change possible as a result of investment, based on an impact management approach that requires the investor to actively seek to deepen the impact of a target. It also accounts for the holistic impact of a set of investments through a portfolio. 


How You Can Use The Methodology

With these characteristics in mind, the Impact Methodology can help you answer the following questions:

  • What are the impact strengths and weaknesses in my portfolio?

  • What sectors am I achieving the highest impact by investing in?

  • How can I compare the impact of two potential portfolio companies?

  • How does my potential pipeline align with my impact thesis?

  • How do I construct due diligence that increases the overall impact of my portfolio?

  • As an social entrepreneur, how does my enterprise impact fit with a given fund’s investment criteria? How can I improve my impact across various categories?

Interested in having your portfolio audited by the Transform Finance Impact Methodology, or applying it to your own enterprise? Inquire at