The Paradox of Impact: Why We’re Not Really Measuring What Matters

Despite its name, the very paradox of impact investing lies in how ‘impact’ is captured, measured—and ultimately, valued. While the promise of this investment approach is to “do good” through the act of investing itself, my research shows that very little actual impact—in the sense of meaningful, measurable change—is ever tracked. Instead, the tools used in the sector, from metrics to reports, mostly stage future possibilities. They perform optimism, not evidence.

A Promise Born After Crisis

Impact investing emerged in the wake of the 2008 financial crisis as a response to growing disillusionment with finance as usual. It promised something different: investments that would not only deliver returns, but also improve lives and protect the planet. A defining idea is that if you invest in a company that does good—say, by offering low-cost financial services to underserved communities—then impact will naturally follow. For example, if a fintech company provides mobile loans to rural farmers, and an investor funds this company, it is assumed that the farmers are better off. Perhaps they can plant more crops, increase income, send children to school. The logic is clear: investment equals impact.

But there’s a catch.

Measuring What Might Have Happened

Those working in the field know how elusive actual measurement is. Even the most committed investors admit that they struggle to know what real change their money produces. Ideally, they say, we would use rigorous tools from experimental economics—such as Randomized Controlled Trials (RCTs) or counterfactual analysis—to isolate the effect of the investment. These methods attempt to answer the question: What would have happened without the investment?

But such approaches are often too expensive, too slow, and too complex—especially in early-stage ventures or in low-data environments. Outside of niche cases like social impact bonds, where precise attribution is tied to payment, these methods remain mostly aspirational.

So what do we use instead?

Outputs, Not Outcomes

In place of rigorous causality, the sector has developed a growing landscape of tools and systems: IRIS+, ISS SDG assessments, impact mapping, and – with increasingly popularity - impact reports. These are designed to demonstrate how an investor’s money is doing good.

But here’s the problem: most of these tools don’t measure impact at all. They measure performances alongside pre-set indicators and large datasets. Moreover, they measure outputs—the immediate activities or products of a company, not the change they cause. They can tell you ‘numbers of loans issued’, numbers of jobs created, or ‘tonnes of waste collected’.  But they are still outputs. They say little about whether lives have improved or communities have changed. And yet, they are framed as “evidence” of impact.

Staging Futures, Not Documenting Results

Even more striking is what these reports and tools actually do. They don’t just present activity; they project potential. They align a company’s work with the Sustainable Development Goals (SDGs)—global targets meant to be achieved by 2030—and in doing so, they render future contributions actionable today.

My ethnographic research inside a venture capital firm working in East Africa showed this clearly. The firm’s first impact report was not based on rigorous measurement—it couldn’t be. Instead, it showcased hopeful stories, output numbers, and SDG icons. The effect? The report felt like evidence. It invited shareholders to believe that social value was not just possible, but already on its way.

This is what I call an affective valuation device—a tool that doesn’t measure past results, but performs a plausible, emotionally resonant future. It doesn’t lie; it stages belief. It doesn’t lie; it invites belief. It renders future impact investible, not because it has occurred, but because it feels possible. Just like much of finance always has.

Why This Matters

This is not a critique of bad intentions. It is a reflection of how finance—especially impact finance—actually works. In financial markets, value often depends not on what has happened, but on what might. This is true for stocks. It is true for startups. And now, it is true for social change.

But this presents a paradox. The more the shareholders and development partners demands proof, the more it relies on tools that sidestep evidence in favour of affect. The more we strive to measure results, the more we end up staging futures. This paradox is not a glitch in the system—it is its operating logic. In impact investing, belief travels faster than verification. And sometimes, that belief is what moves the money.