SOCAP16’s Reflections part 1

Laboratório de Investimento Social
The narrative of impact measurement needs to be changed from complex and costly to simple and absolutely strategic and central to all interventions.

Back from San Francisco, and after having had the time to process all the information from the past week, I want to share with all of you the main aspects and trends discussed by impact investing practitioners at SOCAP16.

To ensure you are not flooded with too much information at once, I will write a post per topics. Let’s start with impact measurement, which had a very central role at this year’s SOCAP. While it is an area going through very rapid developments, it is also gaining increased relevance in impact investing.

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At the opening panel, one of the main messages setting the scene for the coming years was:

The narrative of impact measurement needs to be changed from complex and costly to simple and absolutely strategic to all interventions.

Measuring impact can serve two objectives: 1) evaluate the impact of interventions proving the causal link of a programme; 2) attain learnings that can be used to improve performance and expand impact on a continuous basis.

Traditionally, impact measurement used to follow a top-down approach. It was demanded by investors, as a means to support in investment allocation decisions or simply for marketing purposes.

Today, we observe a cultural shift, where impact measurement follows a bottom-up and client-centric approach. In other words, social enterprises recognise the value creation that measuring their on-going work can have in 1) driving performance and 2) maximising their impact amongst beneficiaries, and thus become the ones initiating and integrating this process as a central activity of their programmes.

Specifically, according to GIIN’s report, “The Business Value of Impact Measurement”, measuring impact can create value in 5 different areas:

  1. Revenue generation
  2. Operational effectiveness and efficiency
  3. Investment decisions
  4. Marketing and reputation
  5. Strategic Alignment and Risk Mitigation

Focus on collecting good data and not much data

Quality of data should be prioritised over quantity. Trying to quantify all types of impact that each intervention delivers brings no benefits to anyone: only a great level of complexity and costs.

There are many different methodologies to be used (e.g.: theory of change, case-based, participatory). While a Randomised Control Trial (RCT) is the most robust methodology to prove causality and attribution, its level of complexity, astronomic costs and some of the ethical/human costs involved with it, prove that it is not a solution for all. An important advice when selecting the measurement methodology is to carefully understand the main purpose of our intervention. Is it to create evidence? Or to scale the intervention?

[RCTs will be further explored during the post on Social Impact Bonds, coming soon]

A practical example:

As Grassroots Capital Management, an impact investor, admitted they cannot yet say that their impact investing portfolio is making people better off. Regardless, they are collecting and analysing data, and know that sooner or later they will be able to claim the social impact of their investments.

So, to finalise, be aware “not to ask yourself the causal relationship of a programme too soon”. Impact may sometimes come in unexpected formats, and we do not want to mistakenly judge the success of an intervention with inappropriate metrics or methodologies.

Rita Casimiro

Analyst

Social Investment Lab

 

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