Sharing the Responsibility of Impact Measurement & Management
Impact measurement and management (IMM) strategies are increasingly becoming more sophisticated, with many impact investors building robust IMM frameworks across their activities to assess performance, adapt strategies, and share insights. As noted in the Global Impact Investing Network’s recent report, The State of Impact Measurement and Management Practice, “the old focus on building buy-in for IMM has evolved into a new focus on integrating IMM into all investment processes.”
Although this strategic shift gives the industry the potential to drive greater impact, this shift has also increased the burden of reporting. And that burden is even more acute for emerging, resource-constrained organizations led by BIPOC and underrepresented leaders. A study of racial inequities in philanthropic funding led by Echoing Green and The Bridgespan Group found that Black-led organizations in their Echoing Green’s Black Male Achievement fellowship—which all focused on improving the lives of Black boys and men in the United States—had revenues that were 45 percent smaller than those of white-led organizations in their fellowship. Unrestricted funding was 91 percent smaller. The study illustrates how organizations led by BIPOC and underrepresented often have more restricted funding, which often comes with more reporting requirements and specific metrics.
Because of these dynamics, impact investors should consider how to reduce the time and resources required of IMM. There is an opportunity to shift the IMM burden, rethink how both impact investors and investees measure and manage impact, and build with a rigorous commitment to value creation and shared learning. These practices—and rethinking of IMM—are also critical to ensure equity throughout the funding and IMM process.
Key Takeaway: Impact investors should consider IMM strategies that shift the burden of reporting from their investees. These new strategies are critical to ensure equity throughout the funding and IMM process.
Who Currently Owns the Burden of IMM?
Impact investors see robust IMM as a mechanism to enable accountability, analysis, and decision making. Robust IMM can also drive insights and direct funding. Many investors are moving beyond tracking outputs, such as lives served, to setting clear impact goals and building a comprehensive understanding of outcomes and systems change that enables investors to determine if their goals are achieved. For example, a workforce development-focused investor that aims to understand the impact and effectiveness of an apprenticeship training program may look to understand not only the number of people trained and placed into jobs, but also the average wage gain and lifetime earnings of each student.
In theory, IMM can also be beneficial for investees. Data allows investees to understand if their intervention is achieving desired outcomes and provides feedback that can shape their products and services. However, in practice, because each investor has their own strategic impact obligations and reporting requirements, investees often must report on a vast range of metrics including data that does not necessarily support or enable their work.
Opportunities for Investors to Take on More
Recognizing that investors also need mechanisms for accountability and insights, there are ways to build robust IMM processes that can balance flexibility and rigor. Investors should consider ways to take on more of the IMM responsibility, which can include:
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Tracking the minimum number of metrics that required to understand impact by defining the evidence of impact required and reassessing the precision required of that evidence;
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Identifying opportunities to resource or take on IMM from their grantees; and
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Identifying new mechanisms for accountability and gaining insights, including collaborating with other investors on IMM that can ease the burden for investees.
In some cases, a tailored, more collaborative and bottom-up approach may enable investors to achieve even greater IMM and insights. Below, we share examples.
Collaborating on an IMM Plan
To begin taking on more of the IMM responsibility, investors can co-create the IMM strategy and plan with investees. Collaborating with investees will enable investors to understand what data can be reasonably collected and to assess which tools and resources are required for further measurement and monitoring.
Rather than obligating grantees to report on these metrics, investors can share their goals for IMM, collaborate with their grantees on how they might be able to share this data, and offer support on measuring and monitoring.
Investors can assess the current IMM capabilities of their investees and identify opportunities to provide additional funding to support the metrics and data required to meet the investor’s IMM mandate and compliance requirements.
Foundations that already employ many of these strategic practices include the Bill & Melinda Gates Foundation, Annie E. Casey Foundation, W.K. Kellogg Foundation, and Barr Foundation.
Building from an Investee’s Existing Data
Investors can adapt what investees currently track and map this data to their own IMM mandate.
In a collaborative effort, Autodesk Foundation provided Acumen America with a grant to support its workforce development portfolio. Autodesk was interested in job placement, wage gain, and training metrics mapped to reporting requirements for workforce development investees that delivered direct training. Acumen America had invested in a wide range of strategies to improve the workforce development system but did not fit this framework directly. Autodesk worked with Acumen to connect their data to Autodesk’s goals.
Acumen America shares its desired IMM goals and works with entrepreneurs to understand the data they’re currently collecting and planning to collect. Often, entrepreneurs may already collect sales and marketing data, not traditionally ‘impact’ metrics, such as Daily Average Users (DAU), time engaged on platform, and Net Promoter Score (NPS). This sales and marketing data can be used to extrapolate the impact of the firm.
Relying on External Data and Research if Possible
Investors conduct comprehensive diligence on the potential effectiveness and quality of the intervention as a part of their investment decisions. Over the past decade foundations, nonprofits, and some policy makers have relied heavily on research results to guide funding for social programs. For example, the U.S. Department of Education’s Investing in Innovation Fund utilizes peer-reviewed efficacy studies to inform their investments.
Even for funding newer, unproven models, there are opportunities for investors to disaggregate the drivers of impact to understand where prior research or models have confirmed parts of the theory of change. This method is the basis of the Impact Multiple of Money, an IMM tool from TPG‘s Rise Fund.
Rather than asking investees to track specific outcomes over time, investors may already have the evidence-backed data and research to extrapolate the potential outcomes from the output data shared by their investees.
Shifting from Measurement to Value-Creation
In addition to building strategies that rely on their own internal resources, investors should also consider how IMM can add value to both potential and existing investees across the full investment process.
Funding Efficacy and Forecast Studies
Rather than regularly tracking and monitoring complex metrics that require meaningful time and resources, efficacy and forecast studies may also provide useful data for both investors and invitees. Particularly for investees, these studies help prove efficacy, attract additional funding, and, if that research can be shared with other funders, reduce the burden of diligence for the firm.
In the due-diligence of early stage ventures like Prometheus Materials and Balloon Tech Co, the Autodesk Foundation in collaboration with Rho Impact conducted their own CRANE analysis to assess the forward-looking emissions reduction potential of their technologies. Autodesk shared this analysis to attract additional funding.
Commissioning Projects for Shared Learning
Similar to efficacy and forecast studies, projects that deliver mission-critical insights to invitees can also provide a view of their impact. For example, beneficiary insights can enable investees to adapt their product and/or service offerings.
Autodesk Foundation commissioned a project with 60 Decibels and Nexleaf Analytics to assess the depth of impact and gain early insights on user behavior and experience with electric pressure cookers (EPCs) by collecting e-cooking data in Tanzania.
The Autodesk Foundation commissioned CEA Consulting to work in collaboration with its portfolio company, BamCore, to take the next step in developing their climate impact analyses. Together, BamCore developed a forward-looking emissions reduction potential (ERP) model that assesses the technical potential for greenhouse gas (GHG) emissions reductions, a forward-looking ERP model assessing emissions reduction over the next 10 years, and a retrospective assessment of emissions reduction realized (ERR) based on sales to date.
Catalyzing Impact Innovations
Moving beyond IMM, investors could also consider encouraging and supporting innovative projects and experiments led by their investees. On the ground, investees have unparalleled access and understanding of the populations they serve and may have ideas for how to better support these populations. But because these emerging projects lack efficacy data, these projects are typically challenging to raise capital for.
Esusu, an alternative data platform that helps low-income Americans build credit and one of Acumen America’s portfolio companies, saw that 60% of their customers would be unable to meet rent immediately following COVID-19 shutdown orders in its data. With direct access to tenants, Esusu could rapidly provide resources to their customers most at-risk for eviction. In partnership with Acumen America, Esusu launched a fund to deploy rent relief grants. The impact of the program has led the fund to become an ongoing initiative of the company.
In Conclusion
Investors have the opportunity to rethink how impact is measured and managed. Investors can not only reduce the burden of reporting on investees, but also identify how IMM can drive new value. Shifts in both ethos and practice are critical to support the great work of all investees, but particularly organizations led by BIPOC and underrepresented founders, given the inequity of funding. Investors can build on these examples and create their own strategies to re-establish their IMM practice.
