Impact intention is at the core of Impact Fund Denmark (former IFU)’s investment strategy. This is reflected throughout the investment process from early-stage investment screening through due diligence to active ownership and responsible exit. An impact theory of change is part of every investment, which is tracked until exit.
Impact Fund Denmark's impact measurement and management system
Abstract
Measuring and managing for impact in blended finance interventions is notoriously difficult. Different interpretations of impact, lack of data, diverse and inconsistent metrics, difficulties in linking activities to outcomes and impact, and cumbersome additionality assessments are some of the challenges providers of development finance face. The risk of siloed impact teams, integrating impact into the entire investment process while aligning impact and financial incentives, and tracking impact post investment are equally challenging. Applying a robust, coherent impact measurement and management (IMM) system can address these challenges and help achieve, prove and improve the impact of blended finance interventions.
Impact intention is at the core of Impact Fund Denmark’s investment strategy. This is reflected throughout the investment process from early-stage investment screening through due diligence to active ownership and responsible exit. An impact theory of change is part of every investment, which is tracked until exit. The measurement and management of impact represent Impact Fund Denmark’s license to operate and inform performance monitoring at both the investment and portfolio levels. IMM starts in the investment strategy, which defines how Impact Fund Denmark identifies and manages impact, and is defined by IFU’s impact house framework that ensures impact is embedded across organisational units and activities. In this regard, IFU’s impact house framework and strategy are informed and shaped by the OECD-UNDP Impact Standards for Financing Sustainable Development and Impact Fund Denmark Principles for Impact Management.
IFU only considers investments that can demonstrate strategic alignment and high impact within four areas: 1) green energy and infrastructure; 2) sustainable food systems; 3) healthcare; and 4) financial services. Investments need to support the green and/or just inclusive economy and demonstrate acceptable risk-adjusted financial returns.
Supporting green economies translates into supporting the six environmental objectives defined in the EU taxonomy: 1) climate change mitigation or 2) adaptation; 3 sustainable use and protection of water and marine resources; 4) transition to a circular economy; 5) pollution prevention and control; and 6) protection and restoration of biodiversity and ecosystems. Substantial contribution criteria from the EU taxonomy, and/or the MDB list for tracking climate finance, are used to qualify environmental impact investments.
Supporting just and inclusive economies translates into reducing inequalities and poverty by addressing the fact that billions of people lack access to essential goods, services and basic human rights. Impact Fund Denmark focuses on increasing such access. Gender is an important dimension of inequality addressed by Impact Fund Denmark, together with a just and fair transition that focuses on the bottom of the income pyramid, poor and fragile states as well as increasing access for the underserved. Impact Fund Denmark has systemised best-practice social contribution criteria to qualify social impact investments.
Note: DD: Due diligence; KYC: Know your customer
Investment process
Initial screening of investments tests strategic alignment on supporting green and/or just and inclusive economies.
Appraisal and assessment focus on the development of an impact theory of change, which is verified during due diligence.
Final agreement includes a results framework detailing impact indicators, baselines and targets
Active ownership includes monitoring impact performance against the results framework.
Exits are planned from ex-ante stage, to ensure conditions are established to support enduring impact.
Assessment of expected impact creation during due diligence
Before investment, due diligence assessment is conducted on impact, commercial viability, legal status, environmental and social risk management, business integrity and corporate governance.
Investments must demonstrate commercial viability, and meet thresholds defined through impact criteria, over and above being able to commit to international best-practise on ESG risk management, including IFC performance standards.
The expected absolute impact must be positive; this is determined through impact criteria that are developed using recognised international standards including, for example, substantial contribution threshold criteria from the EU taxonomy.
Impact Fund Denmark also ensures that investments are financially additional, to ensure that capital is being deployed into re-risking markets and paving the way for future institutional investment.
Impact measurement, monitoring and reporting
Positive impact is monitored by reviewing investee annual results framework reporting to quantitatively assess performance against the agreed-upon and targeted annual metrics.
Sustainability actions plans are monitored to ensure contractually agreed-upon activities are implemented to ensure investees meet Impact Fund Denmark policy requirements through building ESG risk management systems and capability.
Investees must report annually to Impact Fund Denmark, according to defined and agreed-upon Impact Fund Denmark sustainability reporting formats
All of the above informs both internal investment and portfolio review, as well as external reporting requirements.
A robust and coherent IMM system doesn’t just generate better data; it transforms how organisations operate, make decisions, and create impact and value. It helps to ensure clearer strategic focus and accountability and contributes to improved decision-making across the entire investment cycle. It also facilitates aggregation, benchmarking, at scaling, and enables continuous learning and adaptive management. Impact Fund Denmark’s Impact House aligns with the OECD-UNDP Impact Standards for Financing Sustainable Development and can be inspirational to other development finance providers.
This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Member countries of the OECD.
This can include intellectual or funding contributions.
This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
Note by the Republic of Türkiye
The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Türkiye recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Türkiye shall preserve its position concerning the “Cyprus issue”.
Note by all the European Union Member States of the OECD and the European Union
The Republic of Cyprus is recognised by all members of the United Nations with the exception of Türkiye. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.
Kosovo: This designation is without prejudice to positions on status, and is in line with United Nations Security Council Resolution 1244/99 and the Advisory Opinion of the International Court of Justice on Kosovo’s declaration of independence.
Photo credits: © imagedepotpro/gettyimages.
© OECD 2025
Attribution 4.0 International (CC BY 4.0)
This work is made available under the Creative Commons Attribution 4.0 International licence. By using this work, you accept to be bound by the terms of this licence (https://creativecommons.org/licenses/by/4.0/).
Attribution – you must cite the work.
Translations – you must cite the original work, identify changes to the original and add the following text: In the event of any discrepancy between the original work and the translation, only the text of original work should be considered valid.
Adaptations – you must cite the original work and add the following text: This is an adaptation of an original work by the OECD. The opinions expressed and arguments employed in this adaptation should not be reported as representing the official views of the OECD or of its Member countries.
Third-party material – the licence does not apply to third-party material in the work. If using such material, you are responsible for obtaining permission from the third party and for any claims of infringement.
You must not use the OECD logo, visual identity or cover image without express permission or suggest the OECD endorses your use of the work.
Any dispute arising under this licence shall be settled by arbitration in accordance with the Permanent Court of Arbitration (PCA) Arbitration Rules 2012. The seat of arbitration shall be Paris (France). The number of arbitrators shall be one.
