Performance management tools in support of impact investing within investment funds

Abstract

This thesis delves into the critical role of performance management tools in optimizing impact investing within investment funds, framing these tools within Robert Simons' Levers of Control model. The growing field of impact investing demands rigorous methods to ensure that financial returns are coupled with measurable social and environmental outcomes. The research is systematically organized around the four systems developed by Simons (1994): belief systems, boundary systems, diagnostic control systems, and interactive control systems, with each systems scrutinized to incorporate the tools, methodologies, and frameworks that support effective impact monitoring and management. Throughout the thesis, specific tools such as the IRIS, Greenomy reporting software, and Key Performance Indicators are examined for their effectiveness in aligning investments with strategic impact goals. These tools are linked to Simons' four systems, providing a comprehensive framework for understanding how these mechanisms function in practice. The study integrates qualitative insights from interviews with key stakeholders in the impact investing sector, offering a nuanced perspective on the practical application of these tools. The findings underscore the importance of continuous dialogue between investors and investees, robust impact measurement frameworks, and adaptive management strategies. Additionally, the research highlights the varying degrees of rigor and strategic focus among different investment funds, ultimately providing valuable recommendations for enhancing the reliability and effectiveness of performance management tools in impact investing. This thesis contributes to a deeper understanding of how investment funds can achieve both financial and impact objectives through strategic alignment and rigorous performance management tools.