Parties will need to agree on the set of metrics to measure the company’s impact performance, and a schedule for reporting actual results. Measuring impact can be difficult, so the parties should be careful to ensure that the metrics they choose to track accurately reflect the outcomes they’re seeking to achieve.
Metrics may be completely customized or based on publicly available frameworks. The most widely used public framework is IRIS, an online catalog of social, environmental, and financial performance metrics managed by the Global Impact Investing Network (GIIN). See Sample term sheet: loan with impact-triggered default for an example of terms that establish specific impact metrics.
Sample impact metrics language
The Company and the Investors have defined a set of metrics to assess the Company’s performance in [describe impact goals], which metrics are described in [Exhibit X]. [As long as the Investors hold at least X percent of the Shares purchased] OR [During the term of the Loan], the Company shall deliver to the Investors, within X days following the end of each [reporting period], a report setting forth [the metrics] OR [the Company’s progress toward each impact milestone] described in Exhibit X.