ABSTRACT
Impact measurement is considered a core part of impact investing, yet implicit in many approaches to impact measurement is an underappreciation of the costs of impact measurement. In this chapter, a model that incorporates Simon's (1972) concept of bounded rationality will be brought into impact investing to provide additional considerations as to the costs of collecting information needed to measure impact. Costs are often substantial when measurement captures real information, rather than just the accountability theater. This chapter will consider not only the importance of a proper strategic cost-benefit consideration of when to measure impact so that measurement is not so costly that it undermines the actual impact of an investment, but it will also consider who bares the cost of impact measurement. Broadly speaking, the cost of impact measurement is borne by the funder, the agent, the intended beneficiaries of an investment, or some combination thereof. The practical application here highlights that when the cost of impact measurement appears low to the funder of an investment, it is likely because the visible and invisible costs are being absorbed by the agency undertaking the intervention or the intended beneficiaries themselves.
