• Impact Measurement: Best Practices for Climate & ESG Funds in 2025 and 2026
September 1, 2025
Impact Measurement: Best Practices for Climate & ESG Funds in 2025 and 2026
No Comments in News By

Impact Measurement: Best Practices for Climate & ESG Funds in 2025 and 2026

Tags: ImpactMeasurement, ESGFunds, ClimateFinance, Data

Introduction

The global rise of sustainable finance has shifted the focus from financial returns alone to measurable social and environmental outcomes. For asset managers and fund allocators, demonstrating tangible impact has become a cornerstone of credibility. This is particularly true for ESG and climate funds, which now face mounting scrutiny from regulators, investors, and civil society.

The ability to track, assess, and report outcomes — known as impact measurement — is central to accountability. Yet, measuring impact is complex: data availability, methodological differences, and reporting inconsistencies continue to challenge the sector.

This article outlines best practices for impact measurement ESG funds, explores leading frameworks like IRIS+ and GIIN, highlights data challenges, and shares real-world examples of funds that are successfully measuring ESG outcomes in 2025 and 2026.

Why Impact Measurement Matters in ESG and Climate Finance

Investors are increasingly demanding transparency on how capital contributes to sustainable goals. A recent PRI report (2023) found that over 80% of signatories explicitly integrate impact considerations into their investment processes.

Impact measurement in ESG funds matters because it:

  • Builds investor confidence and combats greenwashing.

  • Aligns portfolios with regulatory disclosure requirements like the EU’s SFDR and CSRD (European Commission, 2023).

  • Links capital allocation to global frameworks such as the UN Sustainable Development Goals (SDGs).

  • Provides evidence of long-term value creation beyond financial metrics (GIIN, 2022).

Without rigorous measurement, claims of sustainability remain unverifiable, undermining both credibility and market growth.

Frameworks for Impact Measurement

1. IRIS+ (GIIN)

The Global Impact Investing Network (GIIN) developed IRIS+ as a standardized system for impact metrics. It helps investing professionals select indicators across themes like climate, health, or gender.

  • Strengths: Widely adopted; integrates with SDGs; allows comparability across funds.

  • Limitations: Requires customization; not prescriptive on methodologies.

2. Impact Management Project (IMP)

Although it formally concluded in 2021, the IMP framework continues to guide funds by defining “what” to measure — covering scale, depth, and contribution of impact.

3. Global Reporting Initiative (GRI)

The GRI Standards remain a backbone for sustainability disclosures. While broader than IRIS+, they provide standardized metrics on ESG-related impacts across sectors.

4. EU Taxonomy and SFDR

In the EU, the Sustainable Finance Disclosure Regulation (SFDR) requires funds to disclose Principal Adverse Impacts (PAIs), forcing consistency in climate finance impact metrics.

5. Task Force on Climate-related Financial Disclosures (TCFD)

For climate-specific funds, the TCFD framework provides clear guidance on disclosing risks and opportunities related to the low-carbon transition.

Best Practices in Impact Measurement ESG Funds

1. Define a Clear Theory of Change

Funds must articulate how their capital contributes to measurable outcomes. For example, a renewable energy fund might define its impact pathway as: capital → solar infrastructure → renewable energy generation → CO₂ emissions avoided.

2. Align Metrics with Global Standards

Using IRIS+ or GRI ensures comparability and credibility. For climate-focused funds, aligning with SDGs 7 (Affordable Clean Energy) and 13 (Climate Action) strengthens reporting relevance (GIIN, 2022).

3. Collect High-Quality, Verifiable Data

Relying solely on company-reported data risks inaccuracies. Many funds now integrate third-party ESG data providers (e.g., MSCI, Sustainalytics) or use technology solutions like blockchain to ensure transparency (MSCI, 2023).

4. Combine Quantitative and Qualitative Metrics

While quantitative indicators (tons of CO₂ avoided, MW of renewable energy installed) are critical, qualitative evidence (case studies, community benefits) provides context that numbers alone cannot (GRI, 2022).

5. Independent Verification and Auditing

External assurance of impact reports helps mitigate accusations of greenwashing. The International Auditing and Assurance Standards Board (IAASB) has issued guidance on sustainability reporting assurance.

6. Report Regularly and Transparently

Leading climate funds issue quarterly or bi-annual impact reports, enhancing transparency and meeting LP expectations (Preqin, 2025).

Data Challenges in Measuring ESG Outcomes

Fragmentation of Standards

Despite efforts at harmonization, funds still face a maze of reporting frameworks — SFDR, CSRD, ISSB, GRI, IRIS+. This creates challenges for global investors operating across jurisdictions (European Commission, 2023).

Data Gaps in Emerging Markets

Climate and ESG investing in emerging economies often face weak disclosure infrastructure, making reliable impact measurement difficult (World Bank, 2025).

Greenwashing Risks

Inconsistent definitions of “climate” or “impact” funds lead to inflated claims. The FCA in the UK has increased scrutiny of “impact-labeled” funds to reduce mis-selling (FCA, 2025).

Cost and Resource Constraints

Comprehensive impact measurement requires significant resources — a barrier for smaller funds. Industry collaboration and technology solutions are key to reducing costs (WEF, 2023).

Real-World Examples

1. Mirova’s Climate Strategy Funds

Mirova, a Natixis subsidiary, uses IRIS+ metrics to track renewable capacity installed and CO₂ avoided. Its 2024 report verified by EY showed 8.2 million tons of CO₂ emissions avoided (Mirova, 2024).

2. Generation Investment Management

Founded by Al Gore, Generation IM integrates impact measurement ESG funds into every stage of portfolio management, linking financial performance with sustainability metrics (Generation IM, 2023).

3. BlueOrchard Microfinance Fund

BlueOrchard applies GIIN-aligned metrics to measure social outcomes, including financial inclusion for underserved populations. Its 2024 impact report highlighted reaching over 250 million beneficiaries (BlueOrchard, 2024).

4. European Green Bond Funds

Several EU climate bond funds now integrate TCFD disclosures into annual impact reports, mapping financed projects against CO₂ reductions and resilience outcomes (Climate Bonds Initiative, 2025).

The Future of Impact Measurement in ESG and Climate Finance

Looking ahead to 2025 and beyond, impact measurement is evolving toward:

  • Standardization – ISSB and EU CSRD are pushing for unified disclosures.

  • Technology Integration – AI, blockchain, and IoT will enable real-time measurement of ESG outcomes (WEF, 2023).

  • Investor-Led Accountability – LPs are demanding verifiable impact as a precondition for capital allocation (Preqin, 2025).

  • Beyond Carbon – Measurement will expand to biodiversity, water use, and social inclusion metrics.

The convergence of regulatory requirements, investor expectations, and technological solutions means that rigorous impact measurement ESG funds will become the industry norm.

Conclusion

In 2025, impact measurement is no longer a “nice to have” — it is a necessity for climate and ESG funds. By adopting best practices such as aligning with IRIS+, verifying data, and combining qualitative and quantitative metrics, funds can demonstrate real-world impact and avoid accusations of greenwashing.

As the sector matures, the winners will be those who integrate climate finance impact metrics seamlessly into their strategies, delivering both financial returns and measurable positive outcomes. For asset managers and allocators, credible measuring ESG outcomes is the bridge between intention and accountability.

References:

Impact Investing Magazine